News report

Student loans: Biden debates whether to extend payment break past Aug. 31

Another delay would be the seventh time the date has been postponed since the payment pause and interest freeze was put in place in March 2020.

“The Department of Education will continue to assess the impacts of the Covid-19 pandemic and the economy on student borrowers,” a spokesperson wrote in an email to CNN Monday evening, adding that the agency “will communicate directly with borrowers about the end of the payment pause when a decision is made.”

The payment pause was intended to provide temporary financial relief to those facing loss of income due to the pandemic. But each time payments were due to resume, the Trump or Biden administration pushed back the expiration date.

Currently, payments are expected to resume after August 31, a few months before the midterm elections. Democrats are scrambling to try to avoid losing the party’s majority in Congress.

When can borrowers expect a decision to be made?

Borrowers may be notified of an extension this week if the administration acts the same as the last time it extended the payment break. In April, the announcement came 24 days before payments resumed on May 1.

Meanwhile, student loan servicers say they have The Department of Education has said to suspend sending billing statements, according to Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade group whose members are responsible for servicing more than 95% of all federal student loans.

The news was first reported by Inside Higher Education Last week.

“We were basically told to suspend sending billing statements until at least 30 days before resuming,” Buchanan told CNN.

Student loan servicers are hired by the federal government to collect federal student loans. They are required to send billing statements at least 21 days before a payment is due. But generally, repairers send these statements more than 30 days in advance.

How borrowers can prepare

It has been more than two years since most borrowers had to make payments on their federal student loans.

When payments finally resume, borrowers should still be in the same payment plan as before the pandemic and the amount owed should, for most people, be the same.

But if a borrower is worried about having the means to monthly payment, he or she can call the loan manager now to sign up for a different payment plan. Those who may have lost income in the past two years may be eligible for a lower monthly payment than they were before the pandemic.

Service agents will also ask borrowers to confirm that they wish to continue to have their payments automatically debited from their accounts. If a borrower does not confirm that they want these to resume, the automatic debit will not activate once payments resume.

Buchanan encourages borrowers with questions to contact their loan officers today, rather than waiting for payments to resume.

“If they wait to call until the day the payments actually resume, they can be put on hold for a very long time,” Buchanan said.

Millions of borrowers may also have a new loan manager after several of the companies ended their contracts with the federal government over the past two years. Borrowers must have received notices from both their former repairer and their new repairer if a loan has been transferred. The transfer does not affect existing terms, interest rates, loan release or forgiveness programs, or repayment plans available on the loans.

Loans managed by Navient were transferred to Aidvantage, and loans managed by Granite State were transferred to Edfinancial Services. Borrowers who have been served by FedLoan and are seeking debt relief under the Public Service Loan Forgiveness Program are currently being transferred to the Missouri Higher Education Loan Authority, known as MOHELA.

Biden is also considering a large student loan forgiveness

In the face of political pressure from the left, President Joe Biden is also considering executive action to largely write off some of the balances of 43 million people with outstanding federal student loan debt. He told reporters last week that “the end of August” remained his timeline to make a decision on whether to act.
Top Democratic lawmakers, including Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have called on Biden to write off $50,000 per borrower. But Biden has consistently pushed back on that cancellation and suggested he would support waiving $10,000 per borrower.
So far, Biden has taken a more targeted approach to student debt relief. His administration has authorized $26 billion in write-offs so far — more than any other administration — largely for borrowers who were defrauded by their for-profit colleges and for borrowers with lifelong disabilities.
It also temporarily expanded the Civil Service Loan Forgiveness Program that forgives debt for government and nonprofit employees after 10 years of payments, and made changes to income-based repayment plans, bringing millions of borrowers closer to forgiveness.

But it’s not entirely clear whether the president has the power to largely write off student loan debt with executive action. Biden initially urged Congress to take action to cancel student debt, but Democrats lack the votes to pass such a bill.

A recent Supreme Court ruling that limits the Environmental Protection Agency’s ability to tackle the climate crisis could complicate Biden’s decision-making process. The court’s decision signals that judges may be inclined to restrict the executive’s power to make significant policy changes if its power to do so is not explicitly defined by Congress.