President Biden has extended the federal student loan payment pause until the end of August. This is the fourth time Biden has used executive authority to extend the moratorium on student loan payments, which were set to resume on May 2.
The White House announced that the Department of Education would take steps to help millions of struggling student loan borrowers from default.
How does it help the borrowers?
The extension gives student loan borrowers a few more months to prepare for the resumption of student loan payments. Borrowers are not required to make payments and interest rates will remain 0 percent.
Before the pandemic, borrowers with student loans are automatically reinstated under the new policy. This departure from the previous policy required defaulted borrowers to make nine consecutive loan payments before applying to exit default.
The postponement of payment applies to most federal student loan programs, including the Direct Loan Program (subsidized and unsubsidized loans). This latest extension will keep the pause on student loan repayment, interest and collections in place.
If you are a federal student loan borrower, you won’t have to make payments until the end of the semester or summer, and no interest will be charged on your balance. The relief also applies to most parent PLUS loans and Perkins loans held by the Department of Education.
It does not apply to private loans made by banks or educational institutions.
What if you default on a student loan?
Borrowers with delinquent federal student loans have been included in the pause, which began in the early stages of the pandemic, and the federal government has also stopped collections on delinquent loans as part of the pause.
What do people think about this pause?
According to the borrower advocacy groups, this extension will help borrowers start fresh. The NAACP expects to forgive at least $50,000 in student debt from the Biden administration. The political parties have different views on this pause. The Democrats in Congress praised the pause. But the Republicans think it is a waste of taxpayer money.
According to the most Americans, it is evident that student loan borrowers are happy about this pause. But many who have other types of debt like auto loans think giving preferences to the student loan borrowers is a wrong decision. Many people stay far from their workplace and have to borrow car loans, manage the loan, and other obligations during this pandemic. They say, “Why should they cancel or extend the $50,000 student loan but not the $22,000 car loan? Didn’t we both sign papers agreeing to the loan? A car is a must because we live 10 miles from the nearest town and there is no public transportation here. On the other hand, your student loan was a LUXURY purchased by YOU.”
Will student loan forgiveness be the next move?
It is unclear whether student loan forgiveness is possible in the current political climate. Biden has previously supported some loan forgiveness proposals, but he has not included broad-scale loan forgiveness in his major legislative proposals.
Republican congressional leaders have stated that potential future proposals would face a difficult battle. Some advocates have said Biden should use executive orders to address the issues, but others have questioned the legality of that idea. We should wait to learn whether the federal government will allow some or all national student loan debt forgiveness.