Federal direct student loans have been exempt from interest and principal payments for the past two years for approximately 30 million and 40 million Americans, respectively.
As part of the CARES Act, a ban on student loan debt was first enacted in order to aid the economy and consumers during the initial period of the pandemic’s severe slump. Although it’s been extended multiple times, the current deadline of May 1 is fixed in stone unless it’s renewed.
The student loan payments moratorium was extended twice, once by the Trump administration and once by the Biden administration before it eventually expired last month.
Then, under the Biden administration, it was renewed for an additional year.
According to NAFSA’s Justin Draeger, “It’s really uncertain. Nobody is certain that May 1 will be the start date of payments.”
Payment alternatives and other information are being provided to debtors by loan servicers. Because of an order from the federal government, they aren’t sending out invoices or loan statements yet.
Education Secretary Arne Duncan said in an email to Marketplace that the department “will continue to communicate directly with borrowers concerning federal student loan payments by providing clear and timely updates,” and that this will continue.
Draeger says this “creates confusion and not just for loan servicers, but institutions and universities, who are trying to prepare their students and graduates for loan payback.”
Chris Terry, a 31-year-old Nashville, Tennessee, native, is prepared for the transition. His pharmacy school student debt is six figures, and he says he’s gotten a lot out of not having to pay for the previous two years.
“That allowed us to save a significant amount of money each month. “We were able to use almost 10% of what we actually brought home each month,” he stated.
He and his wife expanded their family by having a second child and purchasing a larger home. When the moratorium ends, he’ll be ready to cut back, but he hopes it doesn’t.
It’s certain that we’ll have to get creative with our budget as the May deadline near.
There are some progressives who are pressing the Biden administration to delay the return of student loan payments for even longer.
In May, student loan repayments will have a negative impact on the economy if they are not delayed. Ali Bustamante, an economist at the Roosevelt Institute, says that families are struggling with a variety of economic stressors, including supply chain interruptions, petrol prices, and health care expenditures.
According to Marc Goldwein of the fiscally conservative Committee for a Responsible Federal Budget, the moratorium is no longer necessary now that the economy has recovered to a large extent.
Unemployment is at its lowest level in more than half a century. “It’s getting close to 2 percent among recent college grads,” he said. We’re spending more on this program than we do on higher education as a whole, at $50 billion a year.
The moratorium is mostly benefiting high-earning professionals with a lot of school debt at the moment, according to him.