When the coronavirus pandemic first swept across the United States in March 2020, student debt relief was one of the first policies enacted to help struggling Americans. The CARES Actpassed March 27, 2020, suspended federal student loan payments until September 30, 2020 and temporarily set the federal student loan interest rate at 0%.
Presidents Trump and Biden have extended the moratorium and payments are currently set to resume on January 31, 2022. Lawmakers and experts are now warning that another extension may be needed.
A recent survey out of 33,703 student borrowers by the Student Debt Crisis Center found that even among student borrowers with full-time jobs, 89% say they are not financially secure enough to start making payments after Feb. 1. And 21% say they will never be financially strong enough to resume payments.
Today, the Student Borrower Protection Center sent a letter to President Biden alongside 207 other organizations (including the American Civil Liberties Union, the American Federation of Teachers, and the NAACP) calling for an extended break.
“In less than 60 days, tens of millions of student borrowers are expected to be sent back to repaying federal student loans they are ill-equipped to pay as the deadly Covid-19 pandemic continues to devastate health and safety. financial affairs of Americans,” reads the letter. “Clearly, payments should not resume until your administration fully delivers on the promises you made to student borrowers to fix the broken student loan system and cancel federal student debt.”
The letter echoes a statement released Monday by Senate Majority Leader Chuck Schumer.
“We’re still in the pandemic, and borrowers were saving an average of $393 a month, which was critical amid Covid,” Schumer said in A declaration. “If we don’t extend the pause on payments, then this ghastly interest will pile up at a time when too many people are still not financially ready to take on a giant monthly bill. Also, with the spread of Omicron, the Uncertainty about what happens next requires at least another extension of the student loan payment pause.”
“In fairness to the [Biden] Administration, they postponed it twice, and they said that was the last postponement,” says Randi Weingarten, president of the American Federation of Teachers. “But given the uncertainty in the lives of so many people right now, we would join Senator Schumer in asking for this moratorium to be extended.”
The pause brought significant relief to the roughly 45 million Americans who owe federal student loans. Credit ratings among borrowers have increased and the Ministry of Education estimates that the policy has collectively saved borrowers approximately $4.8 billion per month of accrued interest.
A letter from the White House sent to CNBC Make It reiterates the relief the break has brought to borrowers.
“As president, I am committed to making college more affordable and easing the burden of tuition fees and student loan debt for those borrowers who need it most,” reads the statement. letter. “That’s why I’ve extended the pause on federal student loan interest and repayments to give millions of Americans a break as we continue to emerge from the Covid-19 pandemic and rebuild our economy. Already, this action has effectively canceled nearly $100 billion in US student debt in the form of lost interest payments.”
The letter further states that the Biden administration “also continues to explore other debt relief measures” and reaffirms the President’s willingness to “support legislation that provides $10,000 in debt relief to each borrower”.
While Mike Pierce, executive director of the Student Borrower Protection Center, says broad student debt forgiveness is needed, he says pausing federal student loan repayments has been a crucial interim measure.
“The biggest win on student debt was continuing the payment break, something Joe Biden did on day one and in office and continued again over the summer,” said Pierce at CNBC Make It. “Telling tens of millions of people that they don’t have to worry about paying off their student loans is one of the Biden administration’s most important anti-poverty initiatives. And we’ll come back to that as defining legacy, like as long as they are able to keep that financial pressure on student borrowers.”
Pierce warns that student loan servicers aren’t ready for all borrowers to come back into the system at once.
“We’ve heard from borrowers who have waited two or three hours just to get basic questions answered – and that’s when payments are on hold,” he says. “When millions of people need to contact their student loan company to get an affordable monthly payment or to get documents processed, the system won’t be able to handle it. And the fact that the administration chooses to restart the payments at the same time for everyone when they could simply [extend the pause] seems totally incompatible with everyone’s experience of dealing with these companies.”
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