According to the Associated Press, President Joe Biden proposes to extend the suspension on federal student loan payments through August 31, citing a federal official. Student debt limbo will last another three months for tens of millions of Americans.
Since the hiatus began in March 2020, this will be the fifth extension. As a result of Russia’s invasion of Ukraine, inflation is rising and gas prices are skyrocketing. Meanwhile, the $1.7 trillion student loan debt portfolio in the United States continues to expand, with no clear path for the burdened.
According to the Education Department, the moratorium saves 41 million borrowers around $5 billion every month.
Though debtors will certainly enjoy the extra leeway, many have become irritated with the continued extensions in the absence of a strategy for universal forgiveness. The activities of the Biden administration are expected to be criticised by both conservative and liberal legislators.
Some Democrats, including Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren, have pressed Biden to utilise his executive authority to forgive up to $50,000 in student loan debt per borrower. Hundreds of Democratic senators sent a letter to President Barack Obama on March 31 urging him to prolong the moratorium until the end of the year and “to provide real student debt elimination.”
However, Biden has stated that such action must come from Congress. With a Senate that is evenly divided and Republicans who are adamantly opposed to debt forgiveness, this is likely to be an uphill battle. During his campaign, the president promised to forgive up to $10,000 in debt per borrower.
The moratorium, according to conservative advocacy groups led by Grover Norquist’s Americans for Tax Reform, has been unduly helpful to individuals with student loan debt at the expense of others without a higher degree. They wrote to Education Secretary Miguel Cardona on March 8 urging him to resume payments as a means of reducing the national deficit and combating inflation.
Meanwhile, borrowers are becoming more adamant in their demands for loan forgiveness on a large scale.
Borrowers from California, Florida, New York, Massachusetts, Ohio, and Pennsylvania travelled to Washington on Monday to encourage President Barack Obama to forgive student loan debt. They gathered in front of the Education Department, holding placards that said “Can’t Pay, Won’t Pay” and “You Are Not a Loan.” The Debt Collective, a debt cancellation advocacy group, organised the event.
Borrowers at the event said the payment suspension was helpful, but they wanted the cancellation to be permanent. They claimed that the frequent extensions make it impossible to plan.
“The pause doesn’t change the fact that it’s still not affordable,” Elisha DeJesus, a children’s therapist in Massachusetts, said.
DeJesus owes almost $40,000 in student loans. Given recent inflation, she suggested restarting payments would be difficult. She’s also paying for petrol more regularly now that she’s back in the office.
The impact of the loan payment suspension on people’s life
Regardless of when payments resume, the government is likely to find difficulties in persuading borrowers to do so. According to a report released in January by the Government Accountability Office, nearly half of the 42.3 million borrowers affected by the freeze are at high risk of default.
People who were late on their loans prior to the delay, those who dropped out of college, and recent grads who haven’t had to make any loan payments have all been included in the at-risk group.
Though it is unclear whether the president would eliminate student loan debt in its entirety, the Education Department has taken steps to provide debtors with permanent relief. Since Biden assumed office, the agency has been on track to cancel more than $17 billion in debt owed by borrowers. Existing debt forgiveness schemes, such as those for borrowers with permanent disabilities or who were cheated by their colleges, have been expanded to provide this forgiveness.
For example, the agency recently reported that it had identified around 100,000 borrowers who might benefit from improvements to the Public Service Loan Forgiveness programme that were announced in October. The impacted borrowers would be able to pay down around $6.2 billion in debt as a result of this. A further $415 million was sent by the government to 16,000 students who had been scammed by for-profit universities.w