8 Signs Biden May Actually Extend The Student Loan Pause Again
Once a remote possibility as recently as a week ago, there are increasingly strong signs that the Biden administration may actually extend the ongoing student loan pause into 2023.
Payments and interest have been suspended on all government-held federal student loans since March 2020 in response to the Covid-19 pandemic. That relief has also stopped all collections efforts against borrowers in default on their federal student loans. Originally envisioned as a six-month period of relief, President Trump and President Biden have each issued multiple extensions, extending the pause for a nearly three-year period.
The most recent extension ends on December 31, and top administration officials had indicated that this would probably be the last one. But new developments have put another extension of the student loan pause very much on the table. Here’s why.
Biden’s One-Time Student Loan Forgiveness Blocked by Courts
Biden announced a sweeping student loan forgiveness initiative in August, whereby the vast majority of federal student loan borrowers with government-held loans would receive one-time debt cancellation of $10,000 or more. 26 million borrowers submitted a student loan forgiveness application in October, and the administration had already approved 16 million of those borrowers for loan forgiveness.
But the Biden administation has had a series of significant legal setbacks as conservative groups and Republican state officials have challenged the program in federal court. Last week, a court in Texas struck down the program as illegal, and the Education Department suspended applications for the program. And yesterday, a federal appeals court granted a nationwide preliminary injunction blocking the program. The Biden administration is appealing, but the loan forgiveness initiative is in very real legal peril. A protracted legal battle will keep the student loan forgiveness plan in limbo for now, and the legality of the initiative may end up before the U.S. Supreme Court.
Biden had linked the resumption of payments in January with his broad student loan forgiveness plan, arguing that the program was intended to make sure that borrowers were not left worse off than they were before the pandemic began, and resuming payments in January would offset any inflationary concerns. But with the plan now effectively blocked, a key argument for ending the student loan pause in December has been eliminated.
Biden Aides Are Open to Extending the Student Loan Payment Pause
As first reported by the Washington Post, top officials in the Biden administration are actively planning for an extension the student loan payment pause, a sign that it is very much on the table. At least one unnamed official characterized the discussions as “increasingly firm plans” to extend the pause — meaning this is likely well beyond just a preliminary discussion.
Advocacy Groups Are Pressuring Biden to Extend the Student Loan Pause
Student loan borrower advocacy organizations are engaging in a broad messaging campaign to persuade the Biden administration to extend the payment pause again.
“With critical pandemic relief set to expire and the President’s debt cancellation plan stuck in the courts, borrowers are facing another crisis,” said Natalia Abrams, President and Founder of the Student Debt Crisis Center, in a statement on Tuesday. “Long-term relief, like extending the federal student loan payment pause and debt cancellation, is the only way borrowers will be able to fully recover from lost jobs, health challenges, and shifts in the economy caused by the pandemic.”
The Biden administration has been responsive to previous messaging campaigns by labor unions, advocacy groups, and progressives in Congress during the run-ups to previous student loan payment pause end-dates.
Loan Servicing Problems Suggest System is Not Ready For Student Loan Payments to Resume
Student loan borrower advocates have been expressing concerns for months that the sprawling federal student loan servicing system is not at all ready for millions of borrowers to restart their payments at the same time. The loan servicing system has undergone significant upheaval during the last two years, with millions of borrower accounts transferred from Navient and FedLoan Servicing to Aidvantage, MOHELA, EdFinancial, and several other loan servicers.
Many borrowers are reporting long call hold times and delays in processing applications for loan forgiveness and repayment programs, suggesting that servicers may not have adequate staffing to address a surge in paperwork and inquiries that will inevitably arrive as payments resume in January.
Survey Suggests Borrowers Are Not Ready for Payment Pause to End
A recent survey by Savi and the Student Debt Crisis Center suggests that many student loan borrowers are not ready to resume payments in January. According to the survey, nearly 50% of borrowers say they would be unable to afford their student loan payments six months from now, and nearly nine-in ten say they are concerned or very concerned that inflation will make it harder to afford student loan payments when they resume. 77% of respondents support extending the student loan payment pause beyond December 31.
“Student loan payments impact whether families can afford basic necessities from food to rent,” said Tobin Van Ostern, co-founder of Savi, in a statement. “We see this concern in the thousands of questions we receive from borrowers on a daily basis who are concerned about their ability to begin repaying student loans and how that process will work.”
There is Precedent for Extending the Student Loan Pause
Originally intended as a six-month period of relief, both President Trump and President Biden have extended the student loan pause for a total of seven times since March 2020.
While another extension would certainly invite criticism of the Biden administration from Republican lawmakers, there is clear precedent for extending the relief in the face of new developments that adversely impact borrowers, such as new Covid-19 variants and associated economic challenges, including surging inflation.
Biden Administration Extends Covid-19 Emergency
The Biden administration has effectively extended the Covid-19 public health emergency by not providing a required 60-day notice to states and healthcare providers prior to ending the emergency. The emergency has been the legal basis of the payment pause under HEROES Act of 2003, which allows the federal government to modify federal student loan programs in response to national emergencies and to ensure that student loan borrowers are not left in a worse position than before the emergency began. One potential problem, however, is that Biden previously declared that the pandemic is over.
New Student Loan Forgiveness and Relief Initiatives Available in July 2023
The Education Department recently unveiled several new initiatives including the IDR Account Adjustment (which may provide significant student loan forgiveness benefits to millions of borrowers), as well as updated regulations that will streamline and improve other federal student loan forgiveness programs including Public Service Loan Forgiveness (PSLF), Borrower Defense to Repayment, and the Total and Permanent Disability (TPD) Discharge program. The administration is also developing a new, potentially more affordable income-driven repayment (IDR) plan, and will be revamping student loan interest capitalization.
These initiatives are expected to be in place by July 1, 2023. This could be a potential target date for another extension of the student loan payment pause, and would align with the intention of the HEROES Act to ensure that student loan borrowers are not left in a worse position than before the pandemic began.
Further Student Loan Reading
Student Loan Forgiveness Status: 6 Updates After Multiple Courts Block Relief
Biden Student Loan Forgiveness Plan Is In Peril: Key Takeaways After Court Rules It’s Illegal
Can You Apply For Multiple Student Loan Forgiveness Programs? Yes — With Some Caveats
A New, Bigger Student Loan Forgiveness Initiative Is Set To Launch — And It’s Not The One That You Think
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