This week, the Biden administration announced a new wave of student loan relief. It included an extension of the ongoing pause on most federal student loan payments and interest accrual, as well as new relief for borrowers in default on their federal student loans.
Here’s what you should know.
1. New student loan pause extension to August 31, 2022 2. This might not be the final student loan pause extension 3. The same student loan pause tems should still apply 4. New extension includes help for defaulted federal loan borrowers 5. Biden hasn’t ruled out broader student loan forgiveness
New student loan pause extension to August 31, 2022
The CARES Act — legislation passed by Congress in March 2020 in response to the COVID-19 pandemic — codified unprecedented relief for federal student loan borrowers with government-held loans. This included a suspension of payments, a freeze on interest, and a cessation of collections activities against borrowers in default.
The CARES Act originally provided for six months of relief. But President Trump issued several extensions through executive action, and President Biden followed suit thereafter. Biden’s most recent extension was set to end on May 1, although there had been growing speculation that he might extend it again.
Sure enough, yesterday the White House confirmed that it would extend the student loan payment pause (and the associated suspension of interest accrual and collections activities) for another four months to August 31, 2022.
This might not be the final student loan pause extension
In its announcement this week, Biden officials did not characterize this as a “final” extension of the payment pause (as they have done in the past), leaving open the possibility that the relief could be extended yet again.
In response to a reporter’s question about whether Biden would extend the relief again after August 31, White House Press Secretary Jen Psaki told reporters this week the administration would “continue to assess” key economic indicators “including costs and inflation.”
Psaki suggested that as we get closer to August, officials will “make an evaluation… The Department of Education will look at that and a range of factors as we get closer to that timeline.”
As a practical matter, even without considering economic indicators, it seems unlikely that the administration would opt to push millions of student loan borrowers back into repayment only a couple of months prior to major national elections.
Several recent surveys have suggested that student loan borrowers may be less motivated to vote in this November’s midterm elections if payments resume or other student loan reforms aren’t passed. The elections will determine which party controls Congress, which will have a big impact on Biden’s ability to enact his agenda.
The same student loan pause tems should still apply
Under the original CARES Act, the months of suspended payments would count toward loan forgiveness programs — including income-driven repayment terms and Public Service Loan Forgiveness. It would be as if payments were being made (as long as all other eligibility criteria are met by the borrower).
Each subsequent extension of the payment pause by the Trump and Biden administrations has carried forward these benefits, and there’s no reason why this extension would be different.
Notably, the Department of Education’s website on the CARES Act-related relief continues to confirm that the same terms and conditions of the payment pause still apply.
New extension includes help for defaulted federal loan borrowers
In the same announcement this week, the Biden administration also indicated that it would provide new relief for borrowers in default on their federal student loans. Defaulted Direct and FFEL-program federal student loans will be automatically rehabilitated and returned to good standing, according to the Education Department. This will restore borrowers’ ability to access key programs like income-driven repayment and Public Service Loan Forgiveness, and will give borrowers a “fresh start” on repaying their loans.
Advocates for student loan borrowers had been pushing the Biden administration to do this for months, given that the CARES Act provides that the months of suspended payments can also count toward loan rehabilitation — a federal loan program that cures default after at least nine monthly payments. The CARES Act’s provisions have been in effect for far longer than nine months.
But the Education Department had required borrowers to formally enroll in rehabilitation by submitting financial information and signing rehabilitation agreements, even though payments weren’t required while the CARES Act was in place. The Biden administration’s new initiative waives this requirement and effectively rehabilitates federal student loans automatically.
Biden hasn’t ruled out broader student loan forgiveness
Not mentioned in this week’s announcement was any further student loan forgiveness initiative. But that doesn’t mean it’s off the table.
For over a year, advocates for student loan borrowers and top Democrats in Congress have been urging Biden to use executive action to enact broad student loan cancellation. Biden has been cool to the idea of unilaterally wiping out massive amounts of student loan debt without express Congressional approval, but he hasn’t outright rejected the notion, either.
On Wednesday, White House Press Secretary Jen Psaki told reporters that Biden “has not ruled out” wide-scale student loan cancellation enacted under executive authority, although she had no specific updates. Last month, White House Chief of Staff Ronald Klain suggested that a decision on executive action-based student loan forgiveness would be made prior to payments resuming, and if no decision is made, the pause on payments would be extended.
Psaki reiterated that Biden would sign a student loan forgiveness bill if Congress were to pass one, but the chances of such a bill making it through the House and the Senate appear to be remote. Notably, no student loan forgiveness was included in Biden’s proposed Build Back Better agenda (which ultimately died in the Senate last year), nor was it included in his recent budget proposal.
So if Biden officials are considering enacting wider-scale student debt cancellation, executive action may be the only viable path.
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