The Biden administration on Friday issued what it says would be the ultimate extension to a student loan moratorium that has allowed thousands and thousands of Americans to place off debt funds throughout the pandemic.
Under the motion, funds on federal student loans will stay paused by means of Jan. 31, 2022. Interest charges will stay at 0% throughout that interval, and debt assortment efforts will likely be suspended. Those measures have been in place since early within the pandemic however had been set to run out Sept. 30.
“This will give the Department of Education and borrowers more time and more certainty as they prepare to restart student loan payments,” Biden said in a statement. “It will also ensure a smoother transition that minimizes loan defaults and delinquencies that hurt families and undermine our economic recovery.”
The policy applies to more than 36 million Americans who have student loans that are held by the federal government. Their collective debt totals more than $1.3 trillion, according to the latest Education Department data.
Questions about the moratorium had been swirling in recent weeks as its expiration date approached. Even as the economy improves, there have been concerns that borrowers are not ready to start payments again. Once the moratorium ends, those who were already behind on payments could have wages and benefits taken away as part of debt collection efforts.
Schumer, Warren and Rep. Ayanna Pressley, D-Mass., applauded the extension in a joint statement Friday, saying it provides relief to millions of borrowers facing a “disastrous financial cliff.”
“The payment pause has saved the average borrower hundreds of dollars per month, allowing them to invest in their futures and support their families’ needs,” the Democrats said.
The Trump administration initially suspended federal student loan payments in March 2020 and later extended it through January 2021. Biden moved to continue it through Sept. 30 soon after taking office.
The Education Department itself has raised concerns about administrative hurdles around suddenly restarting loan payments. In a November 2020 report, the department said it would be a “heavy burden” to reactivate millions of loans at the same time. It warned that some borrowers would likely fall behind on their payments, “at least initially.”
On Friday , the Education Department said the final extension provides enough time to restart the process smoothly, and it gives borrowers a “definitive finish date” to plan for.
“As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment,” Education Secretary Miguel Cardona said in a statement.
Student advocates welcomed the extension, saying it’s a victory for borrowers who have suffered financial hardship during the pandemic. But Republicans criticized the move, saying the economy has rebounded strongly enough to resume payments.
“Students and families faced immense challenges last year, but the American economy continues to recover and there is no rational excuse for continued extensions of non-payment on student loans,” mentioned Sen. Richard Burr, the highest Republican on the Senate Health, Education, Labor and Pensions Committee.
The Biden administration introduced the aid because it faces mounting strain from some Democrats to erase big swaths of student debt. Schumer and Warren have urged Biden to make use of his authority to cancel $50,000 in student debt for all debtors, saying it will jumpstart the economic system and assist households hit exhausting by the pandemic.
They repeated that decision of their assertion on Friday, saying debt cancellation is “one of the most significant actions that President Biden can take right now to build a more just economy and address racial inequity.”
But Biden has questioned whether or not he has the authority for that type of mass cancellation, and authorized students have come to differing conclusions. Earlier this 12 months, Biden requested the Education and Justice departments to check the problem. Officials have mentioned that work continues to be underway.
Biden has beforehand mentioned he helps canceling as much as $10,000 in student debt, however he has argued it must be completed by Congress.