Student Loan Pause Extension Gives Borrowers in Default a ‘Fresh Start.’ Here’s How

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Student loans

Biden has extended the student loan payment moratorium to Aug. 31.


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US President Joe Biden has extended the pause on student loan payments until Aug. 31. This marks the sixth extension of the moratorium since the start of the coronavirus pandemic in March 2020.

“If loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship,” Biden said in a statement. 

The resulting delinquencies and defaults, he added, “could threaten Americans’ financial stability.”

The freeze halts payments and interest for 35 million Americans and collection efforts against the 7 million borrowers currently in default. Collectively, that’s allowed taxpayers to hold on to nearly $200 billion, according to an analysis from the Federal Reserve Bank of New York. 

In all, Americans owe $1.6 trillion in public and private student loans, the most consumer debt besides mortgages.

Here’s what you need to know about federal student loan payments, including how long the pause could last, what other benefits it includes and if Biden will push for more student debt forgiveness.

How long does the pause on student loan payments last?

Federal student debt repayments have been paused for two years now, meaning interest hasn’t accumulated and collections on defaulted debts have been put on hold.

Former President Donald Trump first enacted the pause on student loans in March 2020 and extended it until January 2021. Biden has extended the pause three more times. 

Biden’s administration warned that the January 2022 extension would be the last, but with the omicron variant of COVID-19 sweeping through the US last year, Biden decided to continue the moratorium until May 1, 2022. A March 31 letter from Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren and other top Democrats called on the White House to extend the moratorium again and provide “meaningful” debt cancellation. 

“Restarting repayment will financially destabilize many borrowers and their families, and will cause hardship for many who could not afford repayment,” the letter said. 

Now Biden has extended the repayment freeze once more, pausing payments until Thursday, Sept. 1, 2022.

“That additional time will assist borrowers in achieving greater financial security and support the Department of Education’s efforts to continue improving student loan programs,” Biden said. 

Will Biden pause student loan payments again?

It remains to be seen whether the president will pause student debt payments again when Aug. 31 arrives.  

“Theoretically, Biden could continue to extend student loan relief through multiple executive orders, creating a student loan payment pause ‘forever,'” Zack Friedman, CEO of online financial marketplace Mentor, wrote in Forbes

Or at least until he left office.

What about borrowers who are in default?

As part of his announcement, Biden said he was using executive action to rehabilitate defaulted federal student loans.

Borrowers in default will automatically be given a “fresh start,” according to a statement from the US Department of Education. Their accounts will be returned to good standing and any delinquency will be “cured,” allowing them to repair their credit and gain access to programs like income-driven repayment and Public Service Loan Forgiveness, which benefits those who work for nonprofits.

“During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs,” Secretary of Education Miguel Cardona said in the statement.

Can Biden forgive more student debt? 

While on the campaign trail, Biden said he’d support legislation canceling a minimum of $10,000 of federal loans per borrower. However, the White House has been largely silent on the issue since he took office, though the Department of Education made moves on this front in the last couple of months.

Following the department’s revamp of its Public Service Loan Forgiveness program in October, 70,000 borrowers had their student loans extinguished, collectively reaching nearly $5 billion as of January. Subsequently, in March, the department announced that approximately 30,000 more people have been deemed eligible for relief under the Public Service Loan Forgiveness waiver.

White House Press Secretary Jen Psaki said on Wednesday that the president “has not ruled out” using executive action to cancel substantial amounts of student loan debt.

Whether he has the legal authority to do that without legislation from Congress is still unclear.  

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