Student loan break extended to August 31: NPR


US Secretary of Education Miguel Cardona delivers a speech in Washington, DC, in January. The department has repeatedly extended the federal student loan repayment freeze since the pandemic began in March 2020.

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US Secretary of Education Miguel Cardona delivers a speech in Washington, DC, in January. The department has repeatedly extended the federal student loan repayment freeze since the pandemic began in March 2020.

Chip Somodevilla/Getty Images

The Biden administration announced Wednesday that it is once again extending the moratorium on federal student loan repayments, interest and collections, this time through the end of the summer, Aug. 31. The US Department of Education also unveiled a plan to reset the roughly 7 million borrowers who are in default, taking advantage of the pandemic pause to get their accounts back in good standing.

“We are still recovering from the pandemic and the unprecedented economic disruption it has caused,” President Biden said in a statement announcing the extension. “If loan repayments were to resume on schedule in May, analysis of recent Federal Reserve data suggests that millions of student borrowers would face significant economic hardship, and that delinquencies and loan defaults could threaten the financial stability of Americans.”

The loan repayment freeze began in March 2020, at the start of the pandemic, and will now last at least two and a half years – an unprecedented respite in the financial lives of tens of millions of borrowers. According to the latest data from the department, 500,000 federal student loan borrowers — out of more than 43 million — repaid their loans during the break.

This is the seventh time the moratorium has been extended by the Trump and Biden administrations, according to the Education Department’s Office of Federal Student Assistance. The latest extension comes after reports of an email from the department to loan officers telling them not to communicate with borrowers about the previous repayment deadline of May 1.

The extension, while expected, comes with at least one surprise: It’s shorter than many Democrats had hoped.

Senator Patty Murray (D-Wash.), Chair of the Senate Education Committee, tweeted earlier this week that the payment pause “must be extended until at least 2023. With rising costs and the pandemic rebuilding, now is not the time to start borrowers paying again.”

News of the extension to August also drew a lukewarm response from borrower advocates.

“The Biden administration should absolutely extend the payment pause,” Abby Shafroth of the National Consumer Law Center said in a statement.But the pause is a temporary measure that should be in the service of a longer-term solution, otherwise borrowers could be back in the same crisis four months from now.”

The shorter extension also puts Biden in the precarious political position of asking millions of voters to resume loan repayments on the eve of November’s midterm elections — unless he does what many experts warn. expect him and simply issue another extension over the summer.

“The @White House should just be honest about what they are doing and announce that they will be activating the loan portfolio after Election Day,” tweeted Former Trump Education Secretary Betsy DeVos.

The extension is deeply unpopular with Republican critics of Biden, who have pointed out that the pause on interest and payments has cost the federal government at least $95 billion.

In March, when NPR reported that this extension was likely, the House Education Committee’s top Republican, Rep. Virginia Foxx of North Carolina, replied, “Another reimbursement freeze only creates a injustice that is inevitably inflicted on responsible taxpayers and borrowers.”

Defaulting borrowers get a fresh start

Perhaps the biggest news in today’s announcement wasn’t the expansion itself, which was Washington’s worst-kept secret for weeks, but that vague line from the press release. from the Ministry of Education:

“The Department will continue to assess the financial impacts of the pandemic on student borrowers and prepare for a smooth transition of borrowers into repayment. delinquency and non-payment and allowing them to reinstate reimbursement in good standing. »

This is big news for the roughly 7 million borrowers whose federal student loans are currently in default, many of whom had their wages garnished and Social Security benefits withheld before the pandemic. At the end of the pause, these collections will not resume and these borrowers will be reinstated in good standing.

Normally, to get out of default, the Department of Education requires borrowers to coordinate with a default-focused loan servicing company and make nine “reasonable and affordable monthly payments…within 20 days of default. due date” – and perform them during 10 consecutive months. With this reboot, however, the Biden administration is using its pandemic authority and the ongoing reimbursement pause to forego this rehabilitation process.

“During the break, we will continue our preparations to give borrowers a fresh start and ensure that all borrowers have access to repayment plans tailored to their circumstances and financial needs,” the Education Secretary said. , Miguel Cardona, in a press release.

It’s unclear whether borrowers will also see their access to federal student aid, meaning they’ll potentially be able to take out new student loans — something borrowers in default can’t. Nearly half of all defaulters never finished college, and losing access to federal financial aid can make it especially difficult to go back and earn a degree.

“For too long, defaulting borrowers have fallen through the cracks and fallen victim to the Ministry of Education’s punitive collection system,” Persis Yu of the Student Borrower Protection Center said in a statement. “We applaud the Biden administration’s decision to pull millions of borrowers out of default and give them a fresh start.”

Getting the word out to defaulting borrowers won’t be easy

The hardest part of the ministry’s fresh start for borrowers in default will be finding them. According to a January report from the Government Accountability Office (GAO), “the contractor who handles defaulted borrower loans initially did not have valid email addresses for approximately half of the defaulted borrowers.”

The GAO reported that the Department of Education was able to provide some of the missing contacts, but addresses are still missing for about 1 in 4 defaulting borrowers.

According to the report, “education plans to reach these borrowers using other outreach channels to share messages about rehabilitation options,” including through social media.

No mention of student loan cancellation

News of this latest extension has received mixed reviews from Borrower advocates, not only because it’s shorter than expected, but also because Biden has continued his silence on the possibility of a broader cancellation of student loans.

During the election campaign, Biden pledged to write off at least $10,000 per borrower. The longer he waits to fulfill that pledge — or clearly abandon it — the more pressure he comes under from his fellow Democrats.

“I think some people read these extensions as good policy,” Rep. Alexandria Ocasio-Cortez said. tweeted Tuesday, “but I don’t think these people understand the panic and mess it’s causing people to get so close to these deadlines just to prolong the uncertainty. It doesn’t have the effect that people think that that a. We should cancel them.”

Even Yu, who supports the decision to help defaulting borrowers, said that “the Department should not waste this opportunity to fix the broken student loan system. Under this new fast deadline, the Department should work quickly to end its punitive collection practices, secure meaningful avenues for borrowers to deleverage, and provide widespread debt cancellation.”

It’s possible the Biden administration is still exploring options to write off some level of student debt. It’s also possible that the administration has no debt cancellation plan, but is reluctant to make it clear before the hotly contested midterm elections.

The clearest and most recent indication of Biden’s intentions came last month when White House Chief of Staff Ron Klain noted“The president is going to consider what we should do on student debt before the break expires, or he will extend the break.”

And extend the break, he did.

Elissa Nadworny contributed to this report.


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