The Biden administration on Wednesday announced an extension of the federal student loan suspension, delaying the repayment of student loans until Aug. 31..
Approximately 37 million student borrowers have been confused for months as to whether the payment suspension will be extended. For many of them, this is the first time they have started paying off student loans since the cessation of the onset of corona virus infections in March 2020.
“An analysis of the Federal Reserve’s latest data shows that millions of student borrowers could face significant economic hardship if lending resumes in May.
The Biden administration has already repeatedly extended the suspension of the federal student loan. Most recently, in December, it pushed back the deadline by 90 days from late January to May, despite earlier predictions that it would be a “final” extension in the summer.
In a statement on Wednesday, the president said the extension would “help Americans continue to get back on their feet after two difficult years this country has faced so far” as well as give the Department of Education time to continue developing student loan programs.
A group of Democrat lawmakers, including Senate Majority Leader Chuck Schumer, Senator Elizabeth Warren and House Majority Whip Jim Clipurn, sent a letter to the president in late March. Borrowers saved an average of $ 393 a month during epidemics. Legislators from the same Democratic Party have also called on the president to cancel student loans.
Earlier this month, White House Chief of Staff Ron Klein said a decision on whether student debt forgiveness could be made through administrative action would be made before payments were made or the president would extend the suspension.
“We recognize the importance of extending the payment suspension to borrowers struggling to cope with the effects of the epidemic, economic shocks and inflation. However, President Biden’s fragmented, short – term approach is not enough to meet these challenging times,” said Natalia Abrams. President and Founder of the Student Credit Crisis Center. “The president has an opportunity to implement bold, meaningful relief instead of band-aid measures. We urge the president to consider the impact of permanent student loan cancellation on individuals, their families and the economy.”
The Federal Reserve Bank of New York recently found that the federal student loan suspension has already led to $ 195 billion worth of write-offs this April.
The Committee on Responsible Federal Budget, which has called for the resumption of student loan payments, estimates it will cost $ 50 billion a year to extend the suspension.
While the Biden administration plans to extend the federal student loan suspension, it was first announced by Politico that no decision has been announced regarding the cancellation of the student loan. The president has previously said he wants to get involved in Congress and recommended the cancellation of the $ 10,000 student loan. But dealing with student debt forgiveness in Congress will face an uphill battle with Republicans who oppose the move.
The deeply divided Congress did not have the necessary support to pass the Student Credit Act and when an executive mandate faced legal challenges, student financial aid expert Mark Controvitz suggested that the Biden administration could move on to the regulatory process.
“Income-based repayment plans are effectively debt forgiveness plans,” Controvitz said. “They forgive the remaining debt after many years of repayment.”
Controvitz argued that one of those repayment plans had a much broader regulatory authority, so management could create a new debt forgiveness plan and lower eligibility limits.
Although the broader student loan has not been canceled, since taking office, Biden management has canceled $ 17 billion in student loan loans, including debt-forgiven schools and public service loan waivers and cancellations. Loans for permanently disabled borrowers.
According to the Department of Education, more than $ 43 million in debtors owe more than $ 1.6 trillion in student loans. Student loan debt is the second largest loan to US consumers after mortgages.
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