The Chances That Biden Extends The Student Loan Payment Pause Just Went Up — A Lot

The Chances That Biden Extends The Student Loan Payment Pause Just Went Up — A Lot

Student loan debtors hoping that President Biden will lengthen the present moratorium on student loan funds simply obtained an enormous increase.

The CARES Act, a regulation handed by Congress final yr in response to the pandemic and recession, briefly suspended all funds and froze all curiosity on government-held federal student loans. The invoice additionally paused all collections actions on defaulted federal student loans. The student loan fee moratorium was initially set to final six months, however it has since been prolonged a number of occasions. The present extension of the moratorium ordered by President Biden is about to finish on September 30, 2021.

Several current developments point out that there’s now a powerful risk that the student loan fee pause will likely be prolonged into 2022.

FedLoan Servicing Announces It Will Not Renew Student Loan Servicer Contract

The Pennsylvania Higher Education Assistance Authority (PHEAA), which operates FedLoan Servicing — one of many U.S. Department of Education’s major student loan servicers — abruptly introduced yesterday that it plans to droop its federal student loan servicing enterprise later this yr. FedLoan Servicing’s contract with the Department expires on December 14, 2021. It is not going to search any additional extension or renewal of its contract.

This may have vital penalties for student loan debtors. 8.5 million borrower accounts will must be transferred to completely different student loan servicing corporations — an typically disruptive course of that may trigger lasting hurt to debtors within the type of misplaced data, missed funds, shock late charges, and inaccurate credit reporting.

The student loan fee pause ending solely six weeks previous to the termination of FedLoan Servicing’s contract will solely compound these issues and result in additional confusion and disruption for debtors as their student loans resume reimbursement. Advocacy teams for student loan debtors have been already involved that student loan servicers can be overwhelmed and unable to deal with thousands and thousands of borrower accounts concurrently resuming reimbursement, an occasion that has no precedent. With 8.5 million student loan account transfers added to the combo, the outcomes may very well be catastrophic for debtors.

Student Loan Borrowers Are Not Ready To Resume Repayment

Millions of student loan debtors could not be capable of resume reimbursement this fall. A survey carried out by Student Debt Crisis and Savi discovered that 90% of student loan debtors should not prepared to begin repaying their student loans after the moratorium ends in September.

Furthermore, with the Covid-19 Delta variant spreading in varied pockets of the nation, the pandemic is probably not slowing down sufficiently sufficient to justify a resumption of student loan funds. The Biden administration had beforehand advised {that a} additional extension of the student loan pause can be attainable relying on the standing of the pandemic. At a public occasion in May, Secretary of Education Miguel Cardona mentioned, “We’re looking at it. Obviously, we’re going to always take the lead from what the data is telling us and where we are as a country with regards to the recovery of the pandemic. [A further extension] is not out of the question.”

Education Department Officials Reportedly Support A Further Extension Of The Student Loan Pause

According to POLITICO, key officers on the U.S. Department of Education are supportive of extending the pause on student loan funds to no less than January 2022. These officers would look like in step with a broad coalition of client rights teams and progressives in Congress who’ve been urging the Biden administration to increase the student loan moratorium so that there’s extra time to repair and tackle key student loan applications which have been mired in administrative and bureaucratic woes for years.

“The pause on student loan payments has been a huge relief for families, but it ends in 100 days,” mentioned Senator Elizabeth Warren (D-MA) in a Tweet final week. “We’re urging President Biden to extend it at least another 6 months to give [the U.S. Department of Education] more time to prepare, and borrowers and our economy more time to recover.”

Warren, together with Senate Majority Leader Chuck Schumer (D-NY), and Reps. Ayanna Pressley of Massachusetts and Joe Courtney of Connecticut, wrote a letter to President Biden urging him to increase the moratorium. “Restarting payments… will present a significant challenge for borrowers, loan servicers, and the Department of Education, and we urge you not to let the payment pause lapse when borrowers are still depending on this financial relief,” the officers wrote. They argued that Biden ought to lengthen the moratorium to March 31, 2022 or past, relying on the state of the economic system.

Advocacy teams echoed these sentiments in a letter they despatched to President Biden in March. “There is a broad consensus among borrowers, advocates, industry, regulators, enforcement officials, and lawmakers of both parties that a rush to resume student loan payments is a recipe for disaster, absent significant structural reforms and real, immediate relief, such as debt cancellation, for borrowers trapped in this broken system.”

Next Steps

It is finally as much as the White House to find out whether or not or to not additional lengthen the student loan fee pause. The Biden administration has not expressly acknowledged whether or not an additional extension will occur, nor has there been any indication of a attainable timeline for an announcement.

There has additionally been no phrase on whether or not the Biden administration is transferring ahead with broad student loan forgiveness. President Biden directed his administration to conduct a proper authorized assessment of authorities that may very well be the idea for cancelling student loan debt utilizing government authority. That assessment is ongoing.

Further Reading

Huge Student Loan Servicing Shakeup: This Major Loan Servicer Is Ending Its Contract

Elizabeth Warren To Biden: Extend Student Loan Pause To 2022 Or Later

Your Student Loan Servicer Is Changing: 7 Steps To Protect Yourself Now

Will Biden Cancel Student Loan Debt? We May Know Soon

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