Biden Plans To Pause Federal Student Loan Payments Until August

The Biden Administration is planning to extend the student loan payment pause for the 5th time, Associated Press reported. The current moratorium on repayment was set to expire on May 1. Instead, it appears likely that payments on qualifying federal student loans will remain paused until August 31. Notably, this would restart payments well before the midterm elections in November, and seems likely to set up another fight over further extensions as a result.

Progressive democratic politicians have repeatedly warned that motivating younger voters to turn out will be challenging if the Biden administration turns payments back on before the midterms. They have pushed for significant loan cancellation for student borrowers, with the most common suggestion being $50,000 of forgiveness. Other powerful democrats, including Sen Patty Murray, and Rep Bobby Scott, chairs of the congressional committees with oversight of higher education, have been pushing the White House to continue the pause.

Earlier this month, White House Chief of Staff Ron Klain indicated that the administration wants to decide whether there would be any student loan forgiveness before turning student loan payments back on. Biden has so far been reluctant to follow through on campaign promises to forgive at least $10,000 of student loan debt.

Will student loans be forgiven during this pause?

There has been significant speculation that internal disagreements are driving the reluctance to make decisive moves on both the payment pause and any loan forgiveness proposals, even the more modest $10,000 of cancellation.

This latest extension, and the prior indication from the White House that there will be a decision on any loan forgiveness proposal before repayments start back up, might be a sign that administration advisors in favor of forgiving at least some amount of student loans are winning the internal arguments. Alternatively, this could be the latest in a long line of decisions not to make a hard decision and instead kick the can, again leaving borrowers in limbo.

Standing in opposition to extending the repayment pause are private student lenders and many Republican lawmakers.

Private student lenders, who rely on federal borrowers refinancing with them for a large chunk of their business, have been pushing for a return to repayment. They have even gone so far as to argue that the administration should grant the $10,000 in forgiveness that Biden campaigned on and get everyone else back to repayment. The extended pause in repayments has made refinancing with a private lender look much less attractive to borrowers with prime credit, a group that private student loan companies rely on for a large portion of their business.

Republican Lawmakers have consistently argued that the payment pause needs to end. They are mainly focused on the ongoing cost of the payment pause, which amounts to $195 billion in waived payments through April 2022. They have also suggested that it gives more help to borrowers who took on more debt and tend to have higher-paying jobs.

Many borrowers will be cheering the news of this latest payment pause extension, knowing they have one fewer bill to worry about as the country climbs out of the pandemic while facing inflation in the face. The Department of Education has estimated that the pause saves borrowers $5 billion a month in interest not being added to their loans.

New research, from California policy Lab, on those positively affected by the payment pause, shows that 7.8 million, or nearly three out of every ten student loan borrowers, will be at high risk of missing payments once the pause ends. This latest extension will give the Department of Education, and loan servicers, more time to prepare borrowers for repayment and figure out solutions for the borrowers most likely to struggle.

What comes next for student borrowers?

Given how many times the payment pause has been extended, it is hard to say whether this will be the last extension. However, if it is the final extension before repayment restarts, Klain previously indicated that there would be a decision on any debt forgiveness before it ends.

Polling suggests that providing relief to student loan borrowers would be politically advantageous to Democrats, with significant support for extending the payment pause. If so, it would make sense to see decisions made public before the midterms. But, irrespective of politics, student loan borrowers need more certainty around what they should expect when it comes to proposals on forgiveness or the restart of payment.

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