According to a source familiar with the situation, the Biden administration intends to extend the moratorium on federal student loan repayments until August 31. The repayment moratorium, which has been in effect since the outbreak began, was set to end on May 1.
According to the official, the administration is set to announce the extension on Wednesday.
Borrower balances have been effectively frozen for more than two years, with most federal student loans requiring no payments since March 2020. Interest has stopped accruing at this time, and collections on defaulted debts have been put on hold.
Both former President Donald Trump and Vice President Joe Biden have taken steps to extend the freeze. Biden had previously pushed back the payment restart date three times.
The Biden administration warned that it would be the final extension when it prolonged the pause from September 2021 to the end of January 2022. However, because to an increase in Covid-19 cases throughout the winter, the President pushed back the timetable once more.
Biden has recently come under fire from fellow Democrats and consumer advocacy groups to reschedule the event owing to inflation and continued supply chain concerns that are driving up the cost of common things for families. Last week, dozens of Democratic lawmakers wrote to Biden, pushing him to keep the moratorium in place until at least the end of the year.
Who is eligible for the benefit?
Direct loans and PLUS loans, which are offered to graduate students and parents on behalf of their children, are both eligible. Some federal loans, known as Federal Family Education Loans, or FFEL, were not eligible since they were guaranteed by the government but not formally held by it. Generally, they were paid out before 2010.
For people who work in the public sector and may be eligible for federal student loan forgiveness after 10 years, the payment halt is even more significant. As long as they are still working full-time for qualifying employers, they will receive credit for those ten years of necessary contributions as if they had continued to make them during the pandemic.
According to a recent estimate by the non-profit Committee for a Responsible Federal Budget, the interest and payment freeze, which will last from March 2020 to May 1, 2022, will result in debt relief of an average of $5,500 per borrower.
This respite, according to the report, is largely attributable to the cessation of interest accumulation, and it has primarily benefitted doctors and attorneys, who tend to borrow substantial sums of money for their graduate degrees. The study may understate the relief since it ignores the additional benefit that the payment halt provides to individuals pursuing Public Service Loan Forgiveness.
According to the Committee for a Responsible Federal Budget, the standstill costs the government about $4 billion per month.
Some Democrats advocate for the cancellation of student loans.
Some major Democratic politicians, notably New York Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren, have been lobbying Biden to forgive up to $50,000 in student loan debt per borrower.
During his presidential campaign, Biden made it plain that he favored partial federal student loan forgiveness. But, since assuming office, he has resisted calls to use an executive order to eliminate debt on his own.
Biden has instead pushed Congress to approve legislation that eliminates the $10,000 per borrower cap. He also urged that high-income borrowers be excluded from cancellation, stating last year that the government should not forgive debt for persons who attended “Harvard, Yale, and Penn.”
Existing loan forgiveness programs for borrowers who work in the public sector, those who were cheated by for-profit colleges, and those who are now permanently incapacitated have also been expanded by the Biden administration.
More than $17 billion in federal student loans have been canceled as a result of these initiatives, wiping out debt for more than 700,000 borrowers.
Getting ready for repayment
Borrowers should get a billing statement or other notice at least 21 days before their payment is due, according to the Department of Education. Those who had set up auto payments may need to notify their loan servicing company they want those to continue.
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If borrowers with federal student loans are unable to make their monthly payments once they resume work, they may be eligible for an income-driven repayment plan. Under those plans, which are based on income and family size, a monthly payment can be as low as $0 a month.
