President Joe Biden (Photo by MANDEL NGAN/AFP via Getty Images)
The U.S. Department of Education has now confirmed President Joe Biden will decide “soon” on whether the student loan payment pause will be extended.
Here’s what you need to know — and what it means for your student loans.
It’s crunch time in America for student loans. Biden must contend with three deadlines that will impact the future of student loan repayment and student loan forgiveness. First, the student loan payment pause ends on August 31, 2022. Absent an unprecedented seventh extension of student loan forbearance, federal student loan payments will restart on September 1. Second, within days, Biden could announce his decision on wide-scale student loan forgiveness for more than 40 million student loan borrowers.
Within days, Biden could announce an extension of the student loan payment pause, which means student loan borrowers wouldn’t be required to make any mandatory federal student loan payments. Federal student loan payments have been paused since March 2020, when Congress passed historic student loan relief. Alternatively, Biden could allow the student loan payment pause to expire as planned, meaning student loan borrowers would restart student loan repayment within weeks. If Biden extends student loan relief, then you should expect these 5 things. However, the student loan payment pause ends in less than 15 days, and Biden has remained silent. For previous extensions of student loan forbearance, student loan borrowers received more advance notice. This could suggest that Biden is not planning to extend student loan relief. That said, the Education Department recently instructed student loan servicers to hold off on sending student loan bills to borrowers. Here’s when the president extended each student loan payment pause:
Extension #1: On August 8, 2020, President Donald Trump extended the student loan payment pause through December 31, 2020.
Extension #2: On December 4, 2020, Trump extended the student loan payment pause through January 31, 2021.
Extension #3: On January 20, 2021, Biden’s first day as president, Biden extended the student loan payment pause through September 30, 2021.
Extension #4: On August 6, 2021, Biden extended the student loan payment pause until January 31, 2022.
Extension #5: On December 22, 2021, Biden extended the student loan payment pause through May 1, 2022.
Extension #6: On April 6, 2022, Biden extended the student loan payment pause through August 31, 2022.
“Yes, [the student loan payment pause] is scheduled to end at the end of this month,” U.S. Secretary of Education Miguel Cardona told CBS News. “While I don’t have an announcement here today, I will tell you that we’re having conversations daily with the White House, and borrowers will know directly and soon from us when a decision is made.”
Biden is also considering historic student loan relief through wide-scale student loan cancellation. Who could qualify for student loan forgiveness? According to leaked internal documents from the Education Department, the Biden administration is considering $10,000 of student loan cancellation for all federal student loan borrowers. Student loan forgiveness could include borrowers with Direct Loans, Parent PLUS Loans, Grad PLUS Loans, Perkins Loans and FFELP Loans. Biden is also evaluating an income threshold of $150,000 for individuals or $250,000 for families. If the Education Department has your income information, expect student loan forgiveness within 45 days. Otherwise, student loan borrowers could apply online and self-report their income, with student loan forgiveness possible in about 90 days. There’s no guarantee that Biden will enact broad student loan cancellation. However, since becoming president, Biden has canceled $32 billion of student loans through targeted student loan cancellation.
Here’s what happens next if Biden cancels student loans or extends the student loan payment pause. Biden could make a dual announcement regarding both policies before August 31, which could provide breathing room for borrowers concerned about the ongoing Covid-19 pandemic and an uncertain economic outlook. Biden is facing pressure from Republicans in Congress who proposed a blockbuster new plan for student loan forgiveness. Republicans say Biden has canceled $400 billion of student loans — far too expensive for the federal government — and should end the student loan payment pause immediately. Despite all the uncertainty regarding your student loans, your best strategy is to prepare a game plan for student loan repayment. Neither student loan forgiveness nor the student loan payment pause is a long-term solution. Here are popular ways to pay off student loans and save money:
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