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Biden extends student loan freeze through August

The Biden administration announced on Wednesday that federal student loan repayments would remain suspended until Aug. 31, extending a freeze that began in 2020 but was set to end after this month. The action aims to help millions of borrowers get back on their feet before they have to pay again.

Here’s more on the decision:


The extension gives Americans another four months to prepare for the restart of student loan repayments. Borrowers will not be asked to make payments until August 31 and interest rates will remain at 0% during this time. Under the new action, people who were in arrears before the pandemic will automatically be put in good standing with the Ministry of Education. This is a change from the previous policy, which required defaulting borrowers to make nine consecutive loan repayments and request an exit in the event of default. Education Secretary Miguel Cardona said the extra time will help his agency prepare borrowers for a “smooth transition to repayment.”


The moratorium applies to most federal student loan programs, including the Direct Loans Program, which provides subsidized and unsubsidized student loans. It does not apply to private loans issued by banks, schools or other institutions. The latest federal data shows more than 43 million Americans have student loans, worth a combined $1.6 trillion.


The freeze has been extended several times as a reprieve for Americans facing financial hardship during the pandemic. Announcing the latest action, President Joe Biden said that while the country has seen economic growth, Americans are still recovering. He said the extension will help borrowers “continue to get back on their feet after two of the toughest years this country has ever seen.” It came amid growing fears that many borrowers could quickly fall behind if payments started in May. A note from the Federal Reserve last month warned that without more time, delinquency rates “could return from historic lows to previous highs.”


Federal student loans have been suspended for more than two years. In March 2020, the Trump administration gave borrowers the option to suspend payments for at least 60 days. Congress made it automatic soon after as part of a pandemic relief package. The moratorium was subsequently extended several times by Trump and Biden.


In addition to the loan suspension, the Biden administration has worked to revamp some programs that allow borrowers to erase their debts. The Department of Education has loosened the rules for a notoriously complex program known as the Civil Service Loan Forgiveness Program, and another program that erases student debt for Americans with disabilities. The agency approved $2 billion in debt forgiveness for people who were defrauded by their colleges, plus $1 billion for students who attended the now defunct for-profit ITT Tech college, but who left before graduating. Some Democrats have called for additional changes to the student loan system, including an overhaul of repayment plans that critics say are too complex and difficult to navigate.


As the 2020 presidential candidate, Biden said he would “immediately cancel a minimum of $10,000 in student debt per person.” This does not happen. The White House has said Biden will sign legislation reversing up to that amount, but it has resisted calls to wipe out the debt using executive action. Democrats, including Sen. Chuck Schumer and Sen. Elizabeth Warren, have pressed Biden to write off $50,000 across the board, saying it would further boost the economy and address racial inequities in student debt. In a statement, those Democrats applauded the new extension but said it underscored the need for “swift executive action” to cancel the debt. The White House last year requested a review of the education and justice departments to explore a broad pardon, but no decision has been announced.


Borrower advocacy groups welcomed the extension, but many said it was not enough. The NAACP has urged Biden to forgive student borrowers at least $50,000: “With each repayment extension, you make the case for its cancellation more,” the group said. The Center for Responsible Lending made the same request, saying that while the latest action will give some borrowers a fresh start, “their debts remain the same.” Democrats in Congress applauded the break, while Republicans called it a drain on taxpayers. Senator Richard Burr, a leading Republican on the Senate Education Committee, said the administration “wants to have its cake and eat it too: They want to brag about America’s return to normal after the pandemic, but also want to continue to expand emergency relief policies.”

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