Time is running out for President Joe Biden to decide to extend thewhich is due to end on August 31, 2022. The moratorium on loan repayments has already been extended six times – twice by President Donald Trump and four times by Biden.
Many experts believe Biden will announce another extension, potentially until the end of the year or even later.
“Our outlook … assumes the federal student loan payment moratorium will last through January 2023,” Anthony Noto, CEO of student lender SoFi, told investors Aug. 2. earnings call.
The Department of Education has also told student loan officers to suspend sending new billing statements, according to the wall street journal.
Here’s what you need to know about federal student loan repayments, including how long the pause will last, what other benefits it includes and whether Biden will push for more student debt forgiveness.
When are student loan repayments due?
Federal student debt repayments have been suspended for more than two years, meaning interest has not accrued and collections on defaulted debt have been suspended.
Trump first declared the pause on student loans in March 2020 and extended it twice until January 2021. Biden has extended the pause four more times since taking office.
The Biden administration initially warned that the extension until January 2022 would be the last, but with the omicron variant of COVID-19 sweeping the United States last year, Biden decided to keep the moratorium on until May 1, 2022.
A March 31 letter Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and other leading Democrats called on the White House to extend the moratorium again and “meaningfully” cancel the debt.
“Restarting repayment will financially destabilize many borrowers and their families, and cause hardship for many who cannot afford to repay,” the letter read.
In April, Biden again extended the repayment freeze until September 1, 2022, the current deadline.
“This additional time will help borrowers achieve greater financial security and support the Department of Education’s efforts to continue improving student loan programs,” Biden said.
Will student loan repayments be suspended again?
President Biden has not yet indicated whether he will suspend student debt payments again, but experts believe it is a serious possibility.
“The situation is that we are almost 30 days away from the expected recovery and the [Department of Education] told services to suspend recovery communications for the past few months,” said Scott Buchanan, executive director of the nonprofit Student Loan Servicing Alliance, told the Wall Street Journal July 25.
“Perhaps the department expects the White House to kick the streets again,” Buchanan added.
Zack Friedman, CEO of Online Financial Market Mentor, written in Forbes that in theory, “Biden could continue to extend student loan relief through multiple executive orders, creating a ‘forever’ student loan payment pause.”
Or at least until he leaves office.
What about borrowers in default?
Borrowers in default will automatically receive a ‘fresh start’, according to a statement from the US Department of Education. Their accounts will be restored to good standing and any defaults will be “corrected,” allowing them to repair their credit and access programs such as income-contingent repayment and Cancellation of civil service loanswhich benefits those who work for non-profit organizations.
“During the break, we will continue our preparations to give borrowers a fresh start and ensure that all borrowers have access to repayment plans tailored to their circumstances and financial needs,” said Miguel Cardona, Secretary of the education, in a press release.
Will Biden forgive more student debt?
During the campaign, Biden said he would support legislation canceling a minimum of $10,000 in federal loans per borrower. Democratic lawmakers would like to see that amount increased to $50,000, Bloomberg reported, in hopes of swaying young voters in November.
If he forgives more student debt, Biden would likely cap eligibility for people earning $125,000 or $150,000 a year.
Republicans in Congress have argued that the president does not have the power to write off billions in student debt and introduced legislation to block it.
But there are signs the White House sees things differently: Following the Department of Education’s overhaul of its civil service loan forgiveness program in October 2021, more than 750,000 borrowers have had their loans student turn off, totaling more than $18.5 billion from May 2022.
In 2019, the Harvard Law School Project on Predatory Student Loans complaint lodged against then-Education Secretary Betsy DeVos, claiming her office blocked applications for the Defense of the borrower until reimbursement program, which allows federal student loan debt to be forgiven if the borrower has been defrauded by their school.
In July, the Biden administration accepted plaintiff’s arguments that the Secretary of Education has “considerable discretion” to write off federal student loan debt, Forbes reported. (This month, a federal judge granted preliminary approval to a settlement that would give some 200,000 defrauded borrowers about $6 billion in debt relief.)
Whatever Biden’s decision on more student debt cancellation, borrowers and financial institutions are eager to hear: April 28 White House press conferencethe president said he would make a decision on canceling student debt “in the coming weeks.”
It was almost three months ago.