President Biden Extends Federal Student Loan Pause Until August 31
The decision comes in light of the tough COVID winter, inflation, and continued supply chain issues.
This is the sixth extension of the loan repayment break since March 2020, when President Donald Trump initially suspended federal student loan payments and waived interest amid the COVID-19 crisis. When President Joe Biden came into office in January 2021, he extended the pause and continues to do so as Americans “are recovering from the pandemic and the unprecedented economic disruption it caused,” Biden said in a statement Wednesday.
“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, and delinquencies and defaults could threaten Americans’ financial stability,” Biden continued. “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. As part of this transition, the Department of Education will offer additional flexibilities and support for all borrowers.”
Many parents have their own student loans to pay off, while parents of older kids have their children’s educational debt to worry about.
The pause in federal repayments has allowed families to maintain some sort of financial security throughout the pandemic — as minor as it may seem to those not facing this particular burden. (More than 40 million Americans have federal student loan debt, and about 20 percent of them are in default, according to the Department of Education.) During this time, interest has stopped adding up and collections on defaulted loans have been on hold.
Although Biden previously announced that the last extension would be the final one, the uptick in COVID-19 cases over the winter, as well as inflation and ongoing supply chain issues, reportedly led him to once again extend the pause.
According to CNN, “a recent analysis from the non-profit Committee for a Responsible Federal Budget found that the pause on interest and payments — from March 2020 through the previously scheduled end date of May 1, 2022 — will result in debt relief equivalent to an average of $5,500 per borrower. The pause costs the government roughly $4 billion a month.”
But while many borrowers celebrated the good news, others pushed for bigger changes.
As Senator Elizabeth Warren tweeted out Wednesday, “This extension is critical, but now is the time for the President to use his authority to #CancelStudentDebt.”