This is everything that President Joe Biden said when he extended the student loan payment pause today.
Here’s what you need to know — and what it means for your student loans.
A big win for student loan borrowers today, as Biden extended student loan relief for an unprecedented fourth time. This current extension will pause student loan payments through August 31, 2022. While the announcement is important, Biden’s statement may be even more informative on what to expect next for student loans, student loan relief, student loan forgiveness and student loan cancellation.
Here are 5 key takeaways:
1. Student loan payment pause was necessary to help student loan borrowers
Biden said he extended the student loan payment pause to help student loan borrowers in the wake of the Covid-19 pandemic. Biden noted that “we are still recovering from the pandemic” and “the unprecedented economic disruption it caused.” Therefore, Biden recognizes that the Covid-19 pandemic is still ongoing and that student loan borrowers have struggled financially to recover. Biden referred to the last two years as “two of the hardest years this nation has ever faced.” His rationale for extending the student loan payment pause was to “enable Americans to continue to get back on their feet” and recover financially. (Biden could extend the student loan payment pause forever).
2. Student loan default and student loan delinquency would increase if more student loan relief didn’t happen
Biden relied on data from The Federal Reserve that noted that student loan default and student loan delinquencies could increase if Biden didn’t extend student loan relief. According to Biden, “millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans’ financial stability.” Sen. Elizabeth Warren (D-MA) and her Senate colleagues warned Biden that restarting student loan payments in May could hurt the financial livelihood of millions of Americans. (Student loan cancellation and the student loan payment pause are confusing. Here’s what to know).
3. The student loan payment pause will provide more time to fix student loans
While providing direct student loan relief to borrowers is one goal of extending the student loan payment pause, Biden noted that the extra time will help the U.S. Department of Education improve student loans and student loan repayment. Biden refers to this time period as a “transition.” He then notes, “the Department of Education will offer additional flexibilities and support for all borrowers.” While his statement doesn’t include specifics, the Education Department is working on improving student loan repayment, particularly for student loan borrowers who are financially vulnerable. For example, this could include giving student loan borrowers more time to pay student loans once payments restart and, for a limited period, not reporting late payments to credit bureaus. (Student loan payment pause: Senator says extending student loan relief is unfair to most Americans).
4. Biden did not say that student loan cancellation is coming next
Some student loan borrowers may be hoping that today’s extension of the student loan payment pause is a precursor to wide-scale student loan cancellation. (Biden could cancel student loans while ending student loan relief). However, Biden didn’t mention any wide-scale student loan cancellation in his statement. Warren and Senate Majority Leader Chuck Schumer (D-NY) have been pressuring Biden to cancel up to $50,000 of student loans for borrowers. Advocates and civic groups have joined that call as well. However, Biden has focused on targeted student loan cancellation for specific student loan borrowers. Since becoming president, Biden has cancelled $17 billion of student loans. Biden doesn’t appear ready to enact wide-scale student loan cancellation, but will sign any legislation on wide-scale student loan forgiveness that Congress passes. (New proposal would extend student loan payment pause and cancel student loans).
5. This may not be the last extension of the student loan payment pause
Biden did not refer to today’s extension of the student loan payment pause as “the final extension.” Therefore, it’s possible that Biden extends the student loan payment pause again beyond August 31. Progressive Democrats in Congress have urged Biden to extend student loan relief at least beyond the November 8, 2022 midterm election. Why? They argue that Democrats could lose the midterm election if student loan relief is not extended. Without an extension, the argument goes, Democratic voters could feel alienated and not vote for Democratic candidates. (If student loans don’t get cancelled, student loan borrowers threaten to vote against Democrats). While Biden didn’t call this extension the final one, he hinted that this student loan relief is temporary. “I’m asking all student loan borrowers to work with the Department of Education to prepare for a return to repayment, look into Public Service Loan Forgiveness, and explore other options to lower their payments.” Clearly, Biden indicated that student loan payments eventually will restart, and student loan borrowers need to evaluate alternative options for student loan repayment.
Here are some popular ways to pay off student loans faster. Start preparing now: