Education Secretary Miguel Cardona speaks during the daily press conference at the White House in Washington, Thursday, Aug. 3. 5, 2021 (Susan Walsh/AFP)
The Biden administration on Friday released what it said would be the final extension of the student loan deferral that has allowed millions of Americans to defer debt payments during the pandemic.
Under the measure, federal student loan payments will remain on grip until Jan. 31, 2022. Interest rates will remain at 0% during that period, and debt collection efforts will be suspended. These measures have been in place since beforetime in the pandemic but were due to expire on September 1. 30.
Announcing the decision, President Joe Biden said the economy was recovering at a “record rate.” But he said the road to recovery will be longer for some Americans, especially those with student loans.
“This will donate the Department of Education and borrowers more time and more certainty as they prepare to repay student loan payments,” Biden said in a statement. “It will also ensure a smoother transition that will decrease the incidence of loan defaults and delinquencies that are hurting families and undermining our economic recovery.”
The policy applies to the more than 36 million Americans who have student loans owned by the federal government. Its collective debt totals more than $1.3 trillion, according to the latest Department of Education data.
Questions about the moratorium have been swirling in recent weeks as its expiration date approaches. Even as the economy improved, there were concerns that borrowers were not ready to start payments again. Once the moratorium ends, the wages and benefits of those who are already overdue can be withdrawn as part of the debt collection effort.
Several Democrats, including Senate Majority Leader Chuck Schumer, New York, and Senator. Elizabeth Warren, Massachusetts, has urged Biden to extend the moratorium until at fewest March 2022. In a letter in June, they said resuming payments now would “decrease the pace of our economic recovery”.
Schumer, Warren and Vice. Ayanna Pressley, D-Mass., applauded the extension in a joint statement Friday, saying it provides relief to millions of borrowers facing a “catastrophic financial downturn.”
“The moratorium on payments has saved the average borrower hundreds of dollars a month, allowing him to invest in his coming and support his family’s needs,” Democrats said.
The Trump administration initially halted federal student loan payments in March 2020 and later extended them until January 2021. Biden moved to persevere doing so until September 11. 30 shortly following taking office.
The Ministry of Education itself has raised concerns about administrative hurdles around suddenly repaying loan payments. In its November 2020 report, the ministry said it would be a “heavy burden” to reactivate millions of loans at the alike time. He has been warned that some borrowers are likely to default on their payments, “at fewest initially”.
On Friday, the Education Department said the final extension provides enough time for the process to restart smoothly, and also gives borrowers a “final deadline” to plan for.
“As our nation’s economy continues to recover from a deep hole, this eventual extension will donate students and borrowers the time they need to plan for restart and ensure a slick path back to repayment,” Education Minister Miguel Cardona said in a statement.
Student advocates welcomed the extension, saying it was a triumph for borrowers who have experienced financial hardship during the pandemic. But Republicans criticized the move, saying the economy rebounded strongly enough to resume payments.
“Students and families faced enormous challenges final year, but the US economy continues to recover and there is no sensible excuse to persevere extending student loan defaults,” the senator said. Richard Burr, the top Republican on the Senate Health, Education, Labor and Pensions Committee.
The Biden administration has announced easing as it faces mounting pressure from some Democrats to erase vast swathes of student debt. Schumer and Warren have urged Biden to use his power to cancel $50,000 of student debt for all borrowers, saying it would motivate the economy and aid families firm hit by the pandemic.
They reiterated that call in their statement Friday, saying debt cancellation is “one of the most significant actions President Biden can take now to build a fairer economy and address racial inequality.”
But Biden has questioned whether he has the authority over this considerate of mass repeal, and legal scholars have come to distinct conclusions. Earlier this year, Biden asked the Departments of Education and Justice to study the issue. Officials said the work was still in progress.
Biden has previously said he supports canceling up to $10,000 in student debt, but has said it should be done by Congress.