Biden extends student loan pause as advocates demand White House cancel debts

The US is once again extending its pandemic-era pause on federal student loan repayments and interest rates, pushing back the restart date until at least 31 August.

President Joe Biden formally announced the move on 6 April, marking the seventh time the deadline has been extended under the Biden and Trump administrations, providing more than two years of dramatic financial relief to millions of borrowers.

The moratorium was initially set to expire on 1 May, with more than 43 million Americans holding a collective $1.7 trillion in student loan debt, the majority of which is in federally backed loans.

“We are still recovering from the pandemic and the unprecedented economic disruption it caused," the president said in a statement. “If loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans' financial stability."

The US Department of Education has also announced a plan to reset the status of roughly 7 million borrowers who are in default, as the administration uses the extended pause to restore their accounts to good standing.

“During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs,” Education Secretary Miguel Cardona said in a statement.

That “fresh start” could provide significant relief to millions of borrowers whose federal loans are in default, with garnished wages and Social Security benefits withheld. At the end of the pause, those collections will not resume, and their borrowing terms will be restored in good standing.

Exiting default typically involves coordination with a loan servicing company to make consecutive payments over the course of several months; that process will be waived through the extended pause.

Since March 2020, with congressional passage of the CARES Act, most federal student loan borrowers have been able to pause their monthly payments and with interest rates set at zero per cent. The pause has been extended five times.

According to the department data, 500,000 federal student loan borrowers have been repaying their loans during the pause.

Before the pause was extended earlier this year, nine out of 10 borrowers said they would not be financially stable by 1 February to begin repayment, according to a survey of 33,000 borrowers conducted by the Student Debt Crisis Center.

On the campaign trail, then-candidate Biden supported forgiving up to $10,000 in student loan debt per person, and borrowers and Democrats have been pressing the president to follow through on the commitment via executive action.

Senate Democrats including Majority Leader Chuck Schumer have called on the president to cancel $50,000 in student debt per person, or even more.

Debt relief advocates and some progressive legislators argue the president can cancel nearly all of it with the stroke of a pen. Members of Congress have also repeatedly reminded the president that he campaigned on the promise of relieving at least some of that debt, which falls hardest on women and people of colour.

The White House has said it supports cancelling the debt through congressional action, while administration officials have weighed legal arguments to determine whether the White House can unilaterally cancel debts through executive action.

“The Biden Administration should absolutely extend the payment pause,” Abby Shafroth of the National Consumer Law Center said in a statement. “But the pause is a temporary measure that should be in service of a longer-term fix, or borrowers may be back in the same crunch four months from now.”

Natalia Abrams, president of the Student Debt Crisis Center, said that the president’s “piecemeal, short term approach is not enough to meet these challenging times”.

“The President has an opportunity to pass bold, meaningful relief instead of band-aid measures,” she said in a statement on Wednesday. “We urge the President to consider the transformative effect permanent student debt cancellation would have for individuals, their families, and the economy.”

The extension is “a testament to the hard work of millions of Americans who are leading an unprecedented movement to address the student debt crisis,” according to Student Debt Crisis Center executive director Cody Hounanian. “They have pushed the President to better understand their struggles and this is a sign that he is listening.”