At the end of this month, the suspension of federal student loan payments is scheduled to expire, but despite the approaching deadline, millions of Americans are uncertain as to whether they will really start again for the first time in more than two years.
Since the start of the coronavirus epidemic, the payments on almost 40 million federal student loans have been suspended. For the period of the suspension, the interest rate on such loans has likewise been fixed at zero percent.
Most recently, the halt was extended through August 31 by the Biden administration in April. At the time, the White House stated that the president will decide whether to prolong the moratorium or eliminate student loan debt before it expired.
“It’s an unforced error to be adding more uncertainty to the lives of student loan borrowers at a time where I feel like that word is just defining so much of our experience as workers, as consumers,” said Cody Hounanian of the Student Debt Crisis Center.
According to Scott Buchanan, executive director of the Student Loan Servicing Alliance, the Education Department has instructed student loan services to delay telling borrowers when payments will restart.
Buchanan referred to the government’s failure to provide an update as “very troublesome.” He said that, barring a significant policy change, the government ought to have allowed them to start contacting debtors to assist with the changeover weeks ago, especially because repayments are still expected to resume in September.
Borrowers were required to receive six reminders when the CARES Act’s payment suspension was first implemented in 2020 before payments could resume. It’s unclear if that still holds true.
More than a hundred Democratic legislators are pleading with the administration to extend the student loan payment suspension on Thursday. The legislators said in a letter to the president and Miguel Cardona, the secretary of education, that borrowers across the nation are dealing with a variety of economic problems and that government initiatives are in the works.
A representative for the Education Department told CBS News that the agency would keep track of how the COVID-19 outbreak and the economy are affecting borrowers and that, when a decision is made to terminate the payment suspension, it will get in touch with them personally.
Even if the suspension does end at the end of the month, this does not mean that millions of debtors’ payments will be due on September 1 right away. Once the pause ends, borrowers will receive a billing statement or other notification at least 21 days before their next payment is due, according to the Federal Student Aid office.
While pressure to extend the pause continues, questions remain over whether the Biden administration will move to cancel student loan debt more broadly. A White House official said Monday the administration “is continuing to assess options for cancellation and no decision has been made.”
President Biden stated last month that he will decide on student loans before the end of August. He stated in April that information about student loan forgiveness would be available in the “coming several weeks.” At the time, Biden said that he was thinking about forgiving $10,000 in student loan debt, but he disallowed forgiving $50,000 per borrower, as other Democrats have advocated.
The Education Department calculated that borrowers had already saved $5 billion a month solely by taking the student loan payment suspension into account. From the start of the epidemic to the end of August, it comes to almost $150 billion.
The Biden administration has already approved more than $26 billion in targeted student loan forgiveness for more than 1.3 million borrowers through executive action, including roughly $8 billion for those who had been defrauded by schools, nearly $9 billion for borrowers with disabilities, more than $8 billion through the public service loan forgiveness program, and more than $1 billion for those who had been victims of sexual assault.