A student debt relief program was among the first responses to the Coronavirus pandemic in March 2020.
By passing the CARES Act on March 27, 2020, federal student loan payments were paused for the next nine months.
The interest rate on those loans was temporarily set at 0%.
There was an extension of the moratorium by both the Trump and Biden administrations.
Payments will resume on Jan. 31, 2022.
Experts and lawmakers are predicting another extension as a necessary action.
89% of student loan borrowers, who all have full-time jobs, said their income does not provide them with the financial security to make payments after Feb 1. That’s according to the student debt crisis center’s survey of 33,703 students with debt.
Meanwhile, twenty-one percent informed the center they won’t be able to resume loans payments ever.
Student Borrower Protection Center wrote a letter to President Biden today, joining 207 other organizations (including the American Civil Liberties Union, American Federation of Teachers, and NAACP) requesting an extension of the pause.
“In fewer than 60 days, tens of millions of student loan borrowers are slated to be thrown back into repayment on federal student loans they are ill-equipped to pay as the deadly Covid-19 pandemic continues to devastate Americans’ health and financial security,” the letter states.
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“It is clear that payments should not resume until your administration has fully delivered on the promises you made to student loan borrowers to fix the broken student loan system and cancel federal student debt.”
On Monday, Senate Majority Leader Chuck Schumer issued a statement echoing the letter.
“We are still in the pandemic, and the borrowers were saving an average of $393 a month, which has been critical amid Covid,” Schumer wrote in the statement.
“If we don’t extend the pause on payments, then that horrendous interest will pile up at a time when too many are still not financially prepared to shoulder a giant monthly bill. Moreover, with Omicron spreading, the uncertainty with what happens next demands at least one more extension of the student loan payment pause.”
“In all fairness to The [Biden] Administration, they did postpone it twice, and they said that that was the last postponement,” American Federation of Teachers president Randi Weingarten said.
“But given the uncertainty in so many people’s lives right now, we would join Senator Schumer in asking for that moratorium to be extended.“
In the meantime, about 45 million Americans with federal student loans have benefited from the pause.
It is estimated that borrowers saved roughly $4.8 billion per month by utilizing the policy, and their credit scores have improved.
White House also sent a letter to CNBC emphasizing the relief borrowers have gained from the pause.
“As President, I am committed to making college more affordable and easing the burden of education costs and student loan debt for borrowers who need it most,” the letter states.
“That is why I extended the pause on federal student loan interest and repayments to provide breathing room for millions of Americans as we continue to pull ourselves out of the Covid-19 pandemic and rebuild our economy for all. Already, this action has effectively canceled nearly $100 billion in Americans’ student debt in the form of foregone interest payments.”
Furthermore, the letter notes that the Biden Administration is “also continuing to explore other debt relief actions” and pledges to “support legislation that provides $10,000 in debt relief for each borrower.”
Despite the fact that Mike Pierce, executive director of the Student Borrower Protection Center, asserted that debt forgiveness for all students is essential, he believes a moratorium on federal student loan payments is a significant interim measure.
“The biggest win on student debt has been the continuation of the payment pause, something that Joe Biden did on day one and office and that he continued again over the summer,” Pierce told ‘CNBC Make It’.
“Telling tens of millions of people that they don’t have to worry about their student loan payments, is one of the most important anti-poverty initiatives of the Biden Administration. And we’ll look back on it as legacy-defining, as long as they’re able to keep this financial pressure off student loan borrowers.”
Despite learning this lesson, Pierce warned that student loan servicers are not prepared to deal with so many borrowers at once.
“We’ve heard from borrowers who’ve waited on hold for two or three hours just to get basic questions answered — and that’s right now, while payments are shut off,” he said.
“When millions of people need to reach their student loan company to be able to get an affordable monthly payment or to be able to have the paperwork processed, the system’s not going to be able to handle it. And the fact that the administration is choosing to restart payments all at once for everybody when they could just [extend the pause] seems to be totally inconsistent with everyone’s experience dealing with these companies.”
“It seems like it’s set up to fail.”