Student Loans (Getty Images)
WASHINGTON ( Associated Press) — The Biden administration plans to freeze federal student loan payments until August 31, according to an administration official familiar with the White House’s decision, which allowed millions of Americans to defer payments during the coronavirus pandemic. Is. ,
Student loan payments were due to resume on May 1 after being halted since the start of the pandemic. But following calls from Democrats in Congress, the White House plans to give borrowers additional time to prepare for payments.
The action applies to more than 43 million Americans who owe a combined $1.6 trillion in student loans held by the federal government, according to the latest data from the Department of Education. This includes more than 7 million borrowers who have defaulted on student loans, meaning they are at least 270 days late on payments.
Borrowers will not be asked to make payments until after August 31, and interest rates are expected to remain at 0% during that period.
The expansion was first reported by Bloomberg on Tuesday.
Democrats on education panels in the House and Senate recently urged President Joe Biden to extend the moratorium until the end of the year, citing continued economic turmoil.
Patty Murray, D-Wash., said more time is needed to help Americans prepare for repayment and to rethink the government’s current system for paying off student loans.
“It’s ruining lives and stopping people,” she said in a statement last month. “Borrowers are battling rising costs, struggling to get back on their feet after the public health and economic crisis, and grappling with a broken student loan system – and all this by borrowers of color in particular. felt hard.”
Murray called on the Biden administration to lift all borrowers from default to provide a “fresh start” after the pandemic.
The decision is being taken amid growing concern that large numbers of Americans will quickly fall behind if payments resume in May.
In March, the St. Louis Federal Reserve Bank warned that resuming loan payments could put a heavy burden on borrowers who faced financial hardship during the pandemic. It has been said that the impact will be hardest on black families, who are more likely to rely on student loans to pay for college.
“Severe delinquency rates for student loans may return from historic lows to their previous highs, with 10% or more of the loan outstanding,” the bank said.
The Trump administration initially gave Americans the option to suspend debt payments in March 2020, and Congress soon automated this. The pause was extended twice by the Trump administration and twice under Biden.
The question remains whether Biden will pursue comprehensive loan forgiveness to reduce the nation’s student loans. Some Democrats in Congress pressured Biden to use executive action to cancel $50,000 for all student loan borrowers, saying it would spur the economy and help black Americans who, on average, have student loans. face a high level.
Last year, Biden asked the Departments of Education and Justice to review the legality of comprehensive loan cancellations, but no decision was announced. Biden has previously said he supports the cancellation of up to $10,000, but argued that it should be done through congressional action.
