President Joe Biden (Photo by Mario Tama/Getty Images)
Here’s what to expect with the student loan payment pause.
Here’s what you need to know — and what it means for your student loans.
This week could be the most significant period in student loan history. President Joe Biden is considering two major proposals that could impact more than 40 million student loan borrowers. First, Biden is weighing whether to extend the student loan payment pause, which could delay the restart of federal student loan payments. Second, the president is considering whether to enact wide-scale student loan forgiveness. There are several reasons why Biden could extend the student loan payment pause and enact wide-scale student loan cancellation. Here are some predictions regarding the student loan payment pause.
The student loan payment pause ends on August 31, 2022. Absent an extension, student loan payments for federal student loans will restart on September 1. U.S. Department of Education Secretary Miguel Cardona confirmed yesterday that Biden will announce his decision on the student loan payment pause this week.
Expect Biden to extend the student loan payment pause again. The Biden administration has been relatively silent on whether the president will extend the student loan payment pause. If Biden extends the student loan payment pause, expect these 5 things. Federal student loan payments have been temporarily paused since March 2020, when Congress approved historic student loan relief. President Donald Trump and Biden collectively have extended the student loan payment pause six times. Typically, student loan borrowers have been given at least several weeks of advance notice before prior extensions. With student loan payments scheduled to restart next week, it’s unlikely that Biden would let the student loan payment pause expire with only a few days’ notice. The Education Department also informed student loan servicers — the companies that collect student loan payments — not to send federal student loan bills to student loan borrowers. If borrowers don’t get their student loan bills, that’s another sign that Biden could approve a seventh extension of the student loan payment pause.
If the president extends the student loan payment pause, expect the extension to last several months. Republicans have criticized a potential extension of the student loan moratorium, calling it financially irresponsible and a ploy by Democrats to win votes in the November midterm election. Democrats say student loan borrowers are struggling from the ongoing Covid-19 pandemic and aren’t ready to restart student loan payments. Like Sen. Elizabeth Warren (D-MA), Biden is also concerned about student loan borrowers who face student loan default, which is why he is giving them a “fresh start.” If Biden extends the student loan payment pause, he likely will extend beyond the election on November 8, 2022. A logical deadline could be December 31, 2022. Given that day is a holiday, Biden alternatively could choose January 31, 2023.
Never say never, but if Biden extends the student loan payment pause, expect this to the final extension. Biden may not label the potential extension as “final,” but you should plan as if student loan payments will restart thereafter. Biden could weigh several factors when deciding whether to extend the student loan payment pause. For example, among other factors, Biden likely will consider the economy, inflation, the Covid-19 pandemic, the cost of pausing student loans.
The next step for your student loans is to follow Biden’s announcement on the student loan payment pause, which could happen any day. The U.S. Department of Education also should contact you in writing regarding the status of federal student loan payments. If you have questions, you should contact your student loan servicer. Importantly, there’s no guarantee that the student loan payment pause will continue or for how long. Plus, the student loan payment pause is temporary. Therefore, you need a long-term strategy to pay off student loans. These are some of the best ways to save money and pay off student loans faster:
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