By Collin Binkley | Associated press
The Biden administration on Friday released what it says is the final extension of a student loan moratorium that has allowed millions of Americans to postpone paying their debts during the pandemic.
As part of this action, payments on federal student loans will remain suspended until January 31, 2022. Interest rates will remain at 0% during this period and debt collection efforts will be suspended. These measures have been in place since the start of the pandemic, but were due to expire on September 30.
Announcing the decision, President Joe Biden said the economy was recovering “at an all time high.” But he said the road to recovery will be longer for some Americans, especially those with student loans.
“This will give the Department of Education and borrowers more time and more certainty as they prepare to restart student loan payments,” Biden said in a statement. âIt will also ensure a smoother transition that minimizes payment defaults and defaults that hurt families and undermine our economic recovery. “
The policy applies to more than 36 million Americans who have student loans held by the federal government. Their collective debt stands at more than $ 1.3 trillion, according to the latest data from the Department of Education.
Questions about the moratorium had swirled in recent weeks as its expiration date approached. Even as the economy improves, there are concerns that borrowers may not be ready to restart their payments. Once the moratorium is over, those who were already in arrears could have their salaries and benefits withdrawn as part of the debt collection efforts.
Several Democrats, including Senate Majority Leader Chuck Schumer, NY, and Senator Elizabeth Warren, Mass., Have urged Biden to extend the moratorium until at least March 2022. In a June letter, they said restarting payments now âwill slow the pace of our economic recovery.
Schumer, Warren and Rep. Ayanna Pressley, D-Mass. Applauded the extension in a joint statement Friday, saying it relieves millions of borrowers facing a “dire financial cliff.”
âThe payment break has saved the average borrower hundreds of dollars a month, allowing them to invest in their future and support their families,â Democrats said.
The Trump administration initially suspended federal student loan payments in March 2020 and then extended them until January 2021. Biden decided to continue them until September 30 shortly after taking office.
The education ministry itself has raised concerns about administrative hurdles associated with the sudden resumption of loan repayments. In a November 2020 report, the ministry said it would be a “heavy burden” to reactivate millions of loans at the same time. He warned that some borrowers would likely fall behind in their payments, “at least initially.”
On Friday, the Education Ministry said the final extension left enough time to restart the process smoothly and gave borrowers a “definitive end date” to plan for.
“As our country’s economy continues to recover from a deep hole, this latest extension will give students and borrowers the time they need to plan for the restart and ensure a smooth return to repayment,” said Education Secretary Miguel Cardona in a statement.
Student advocates hailed the extension, saying it is a victory for borrowers who have suffered financial hardship during the pandemic. But Republicans criticized the move, saying the economy has rebounded strong enough to resume payments.
“Students and families faced immense challenges over the past year, but the US economy continues to recover and there is no rational excuse for the continued extensions of student loan defaults,” said Sen. Richard Burr, the Senate’s top Republican for Health, Education. , Committee on Work and Pensions.
The Biden administration has announced the relief as it faces increasing pressure from some Democrats to write off huge swathes of student debt. Schumer and Warren urged Biden to use his authority to write off $ 50,000 in student debt for all borrowers, saying it would jumpstart the economy and help families hit hard by the pandemic.
They reiterated the call in their statement on Friday, saying debt cancellation is “one of the most important actions President Biden can take right now to build a fairer economy and fight racial inequality.”
But Biden wondered if he had the authority for this type of mass cancellation, and legal experts came to different conclusions. Earlier this year, Biden asked the Education and Justice Departments to look into the matter. Authorities said the work was still ongoing.
Biden has previously said he supports canceling student debt up to $ 10,000, but argued it should be done by Congress.