President Joe Biden on Wednesday announced a further extension of the suspension of payments on federal student loans, this time until September.
This is the sixth extension of the hiatus, which lasted more than 24 months and two presidencies. Borrowers saved nearly $200 billion during that time, the Federal Reserve found.
The policy of freezing the bills of tens of millions of Americans with education debt was first put in place by the former Trump administration in March 2020, when the coronavirus pandemic put the US economy on edge. knees.
The Biden administration has been working to end the pause on student loan repayments as the economy’s recovery from pandemic lows continues.
Supachok Pichetkul / Eyeem | Eye | Getty Images
According to an analysis by higher education expert Mark Kantrowitz, nearly all borrowers eligible for the break have used it, with only around 1% continuing to pay.
Although the country has seen huge improvements since the crisis began, it would be risky to resume student loan repayments now, Biden said.
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“We are still recovering from the pandemic and the unprecedented economic disruption it has caused,” Biden said in a statement.
Restarting payments could “threaten the financial stability of Americans,” the president said, citing recent Federal Reserve research that predicts an increase in delinquencies and defaults when bills start again.
Biden is also under tremendous pressure to write off student debt. During the election campaign, he promised to cancel $10,000 for everyone.
Senate Majority Leader Chuck Schumer, DN.Y., and Sen. Elizabeth Warren, D-Mass., are pushing him to write off closer to $50,000 per borrower.
Nearly 66% of likely voters support the president’s cancellation of student debt, with more than 70% of Latino and black voters in favor, according to a recent poll.
White House Chief of Staff Ron Klain said last month that the administration wanted to make its decision on whether to cancel the loan before reactivating payments.
“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 on the “Pod Save America” podcast.
Even before the health crisis, student loans were a major challenge for many households. Outstanding education debt exceeds $1.7 trillion, putting more strain on families than car or credit card debt.
Some 40 million people in the United States have student loans, and more than a quarter are in default. The average balance is over $30,000.
Still, repeated extensions of the payment pause will bring its own problems for borrowers, warned Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
“What more can a borrower believe or expect when the government keeps changing its mind?” Buchanan said. “When the inevitable recovery finally happens, millions of borrowers will likely miss it and become delinquent because of the false expectations the government is now setting.”
Kantrowitz said borrowers probably wouldn’t take the September restart date too seriously at this point.
“The US Department of Education has extended the payment break and interest relief so many times and on such late notice that no one will believe them when they really start paying back,” he said.
“They need to stop sitting on the fence about canceling student loans,” Kantrowitz added.