Student loan payments restart in 15 days, but President Joe Biden remains silent.
Here’s what you need to know — and what it means for your student loans.
The student loan payment pause will end on August 31, 2022, which means that student loan borrowers must prepare for the restart of federal student loan payments on September 1. Student loan borrowers hoping for a seventh extension of the student loan payment pause may be out of luck, as the president hasn’t given any indication of continued student loan forbearance.
Student loan payment pause: when payments restart
When student loan payments restart on September 1, you should be prepared for what happens next. Federal student loan payments have been paused since March 2020 when Congress passed the Cares Act, the $2 trillion stimulus package. That landmark legislation contained historic student loan relief, including:
- student loan forbearance for federal student loans;
- 0% interest rates on federal student loans; and
- no collection of student loans in default
President Donald Trump extended the student loan payment pause twice, and Biden extended the student loan payment pause four additional times. Beginning on September 1, monthly student loan payments will be due for more than 40 million student loan borrowers. Rather than 0% student loan interest, student loan interest rates for federal student loans will reset to the same interest rate from before the Covid-19 pandemic. What about recent increases in interest rates? Since federal student loans have fixed interest rates, student loan borrowers will not be impacted by the Federal Reserve’s recent interest rate increases.
Will Biden extend the student loan payment pause?
Student loan borrowers wonder whether Biden will extend the student loan payment pause. For Biden’s entire presidency, borrowers haven’t been required to pay a single dollar of federal student loans. Progressive Democrats such as Sen. Elizabeth Warren (D-MA) and other major civic organizations have urged Biden to extend the student loan payment pause again until at least the end of the Covid-19 pandemic. Why? They say student loan borrowers are unprepared to restart student loan payments, the Covid-19 pandemic is still ongoing, and borrowers face increased economic uncertainty. Warren worries that millions of student loan borrowers could end up in student loan default or student loan delinquency if student loan payments restart now.
The White House and Biden have each confirmed that Biden will announce a decision on wide-scale student loan forgiveness before August 31, 2022. That’s the same day the student loan payment pause expires. However, the Biden administration has remained silent on the prospect of another extension of the student loan payment pause. There are several indications that Biden could extend student loan relief. For example, U.S. Secretary of Education Miguel Cardona said the Education Department would be ready if Biden extends student loan relief. The Education Department also instructed student loan servicers not to send student loan bills to borrowers, which fueled further speculation that student loan payments wouldn’t restart as planned.
Student loans: next steps
While there’s speculation Biden could extend student loan relief, there’s little hard evidence to support this claim. Republicans want Biden to end the student loan payment pause immediately, citing the $5 billion a month cost to the federal government. They also introduced a new blockbuster plan on student loan forgiveness, which could reshape the future of student loans. With only days remaining until the end of the student loan payment pause, Biden could announce a decision any day. Historically, Biden has announced an extension of the student loan payment pause with at least three weeks notice. However, that deadline has passed, leaving student loan borrowers wondering whether another extension is only wishful thinking. Perhaps Biden could announce his decision on wide-scale student loan forgiveness and the student loan payment pause together. That said, student loan borrowers should prepare for the restart of federal student loan payments. Here are some of the best ways to pay off student loans and save money:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
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