Will Biden extend the pause on student loan payments again?

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Student borrowers are back in limbo, bracing for their monthly payments to resume as buzz builds around the possibility of another extension.

If this sounds familiar, that’s because we’ve been here before: Federal student loan repayments have been suspended and interest waived since March 2020. In the two years since, the deadline for this abstention period has been postponed five times. .

The payment break is now set to end on May 1. But recent comments and actions by President Joe Biden’s administration have some pundits — and many hopeful borrowers — believing that another extended pause is on the horizon.

It would be a popular decision for many. About half of likely voters, including 67% of Democrats and 39% of Republicans, support another extension, according to a poll released Wednesday by Morning Consult. An earlier survey, by Consumer Affairs, found that 68% of respondents thought the break would be extended again, while 55% thought their loans would eventually be forgiven.

Signs of another extension of the student loan pause

Earlier this month, White House Chief of Staff Ron Klain hinted at the possibility of another extension in an interview on the Pod Save America podcast.

“I think the president is going to look at what we should do on student debt before the break expires, or he’ll extend the break,” Klain said.

“Whether or not there is executive action on canceling student debt when payments resume is a decision we will make before payments resume,” he added. .

It’s quite a different tone than the administration adopted last fall, when the White House explicitly said it would not extend the recess beyond Jan. 31. (The administration finally changed its tune in December amid a spike in COVID-19 cases.)

Another indication that the current extension won’t be the last: Last week, Politico reported that Education Department officials had asked student loan services to suspend sending notices to borrowers about the restarting their payments.

The CARES Act, which formalized temporary forbearance, requires that six notices be sent to borrowers telling them when normal payment obligations will resume and what options they have if they cannot afford their payments. So the ministry’s reluctance to start sending notifications when the forbearance is due to end in just six weeks is a sign that an extension may be imminent.

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Do borrowers need another extension?

Many borrowers would say that it is necessary to extend the break. A recent Data for Progress survey found that 38% of borrowers are “not at all confident” in their ability to repay their loans once repayments resume.

Yet critics of maintaining the forbearance period argue that there is no real economic need to suspend payments further. Mark Kantrowitz, student loan expert and author of the book How to appeal for more college help, points out that unemployment rates have normalized, as have default and forbearance rates for borrowers who are not eligible for the payment pause and interest waiver.

Meanwhile, loan officers have increased call center staff and expanded hours in preparation for restarting payments. Education Ministry officials said they would help borrowers ease the transition by not reporting missed payments to credit reporting agencies. In addition, the managers have planned targeted awareness raising for risky borrowers. Kantrowitz argues that there isn’t much more you can do to prepare.

“There is no doubt that a few borrowers will experience financial difficulties, but no more than before the pandemic,” says Kantrowitz. “In a way, restarting repayment is similar to starting repayment at the end of the 6-month grace period, when borrowers got used to ignoring their loans for a while after graduating.”

In fact, although the latest extensions have been well received by borrowers, they have created logistical headaches for the Department of Education and Services, particularly in terms of communicating with borrowers about resuming payments. Another extension can only add to these problems.

“No one is going to believe them when they say the refund will start again when they set a new expiration date,” Kantrowitz says. “They’ve cried wolf too many times.”

That said, the law that gives the president the power to suspend student loans — the HEROES Act — allows him to do so as long as there is an official state of emergency, according to Robert Farrington, founder and CEO of The College Investor. , a website that focuses on finances for student borrowers.

It’s the same law that allowed Biden’s Department of Education to put in place a temporary Public Service Loan Relief (PSLF), which is expected to allow hundreds of thousands of eligible workers to work. cancel their loans more easily.

“This forbearance program and the current state of emergency extend through October 2022, so it would make sense for student loan forbearance to be extended until then as well,” Farrington says.

But that would mean reactivating payments just before the midterm elections in November, which would likely be unpopular with Democrats on the ballot.

“The most recent extension of the payment pause and interest relief appears to have been driven by politics, not politics,” Kantrowitz says. And the same could be said for all future expansions.

What about student loan forgiveness?

Biden has said in the past that he’s willing to forgive $10,000 in student loan debt per borrower. However, he has not pursued such a program so far. Part of the problem is that there is a big question mark around the legality of doing so. It has, however, written off more than $13 billion in student debt through more targeted initiatives and changes to existing remission programs.

Even so, Klain’s comments suggest the possibility is still being considered. If the federal government were to cancel some student loans, Kantrowitz says he would likely want to do so before the payment pause and interest relief expire. After all, it wouldn’t make much sense to start repayment again in May only to write off much of that debt a few months later.

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What borrowers should do in the meantime

All of this uncertainty leaves borrowers with a lot of questions. But Farrington says that, whether student loan repayments resume in May or at a later date, it won’t hurt borrowers to prepare now. “That means getting organized with your loans,” he says.

For example, it’s a good idea to check if your loan manager has changed recently (about half of borrowers have). If so, make sure your contact information is up-to-date to receive important communications and updates.

Farrington also recommends spending time tracking all of your loans, double-checking the repayment plan you’re on, and preparing your budget for that extra monthly expense. “Also, if you have autopay set up… you will also need to re-enter that information,” he said.

In other words, borrowers should be proactive about their loans and prepare to pay them back by May 1 — until they hear otherwise, anyway.

What borrowers should do in the meantime

All of this uncertainty leaves borrowers with a lot of questions. But Farrington says that, whether student loan repayments resume in May or at a later date, it won’t hurt borrowers to prepare now.

“That means getting organized with your loans,” he says.

For example, it’s a good idea to check if your loan manager has changed recently. If so, make sure your contact information is up-to-date to receive important communications and updates.

Farrington also recommends spending time tracking all of your loans, double-checking the repayment plan you’re on, and preparing your budget for that extra monthly expense. Borrowers whose bills are paid on automatic payment must also re-enter this system.

In other words, borrowers should be proactive about their loans and prepare to pay them back by May 1 — until they hear otherwise, anyway.

More money :

A pandemic relief program has offered a lifeline to struggling student borrowers. Most never knew

Why hasn’t Joe Biden forgiven all your student loan debt? Short answer: he never promised to

Waiver of Public Service Loans: 5 Steps to Cancel Your Student Loans Under the Temporary Waiver

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