Student loans: President Joe Biden extends payment pause to Aug. 31, White House announces

WASHINGTON, DC — The Biden administration plans to freeze payments on federal student loans through August 31, extending a moratorium that has allowed millions of Americans to defer payments during the coronavirus pandemic, according to an administration official who is with familiar with White House decision-making.

The video above is from a previous story.

Student loan payments were due to resume on May 1 after being halted since the pandemic began. But after calls from Democrats in Congress, the White House plans to give borrowers extra time to prepare for payments.

The measure applies to more than 43 million Americans who owe a total of $1.6 trillion in student debt held by the federal government, according to the latest Department of Education data. 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 required to make payments until after August 31, and interest rates are expected to remain at 0% during that period.

The extension was first reported by Bloomberg on Tuesday.

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Democrats on education panels in the House and Senate recently called on President Joe Biden to extend the moratorium through the end of the year, citing ongoing economic upheaval.

Senator Patty Murray said more time is needed to help Americans prepare for repayment and to reconsider the government’s existing system for paying off student debt.

“It ruins lives and holds people back,” she said in a statement last month. “Borrowers are grappling with rising costs, struggling to bounce back from public health and economic crises, and struggling with a broken student loan system — all of which are being felt particularly hard by borrowers of color.”

Murray called on the Biden administration to lift all borrowers out of default to allow for a “fresh start” after the pandemic.

The decision comes amid growing concerns that large numbers of Americans would quickly be left behind if payments resumed in May.

In March, the St. Louis Federal Reserve Bank warned that resuming loan payments could weigh heavily on borrowers facing financial difficulties during the pandemic. It said the impact would be hardest on black families, who are more likely to rely on student loans to pay for college.

“Serious default rates on student debt could bounce back from historic lows to previous highs where 10% or more of debt was past due,” the bank said.

The Trump administration initially gave Americans the option to suspend loan payments in March 2020, and Congress made it automatic soon after. The pause was extended twice by the Trump administration and twice more under Biden.

It remains questionable whether Biden will seek sweeping debt relief to reduce the country’s student debt. Some Democrats in Congress have pushed Biden to use executive action to remove $50,000 from all student loan borrowers, saying it would boost the economy and help black Americans, who face higher student debt on average.

Last year, Biden asked the education and justice departments to review the legality of widespread debt relief, but no decision was announced. Biden previously said he supports canceling up to $10,000 but argued it should be done through congressional action.

Copyright © 2022 by The Associated Press. All rights reserved. Student loans: President Joe Biden extends payment pause to Aug. 31, White House announces

Dais Johnston

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