After pausing student loan payments during the COVID-19 pandemic, President Joe Biden now plans to extend the moratorium until August 31.
The administration stopped requiring Americans to make these payments at the beginning of the pandemic, planning for them to resume again on May 1.
However, Democrats suggested extending the pause, and the White House agreed that Americans deserved more time to make their student loan payments again.
The action will apply to 43 million Americans, who owe the federal government about $1.6 trillion. These numbers include over 7 million borrowers who have defaulted on their student loans, meaning they are at least 270 days behind on payments.
Even so, borrowers in default and others who owe will not have to make student loan payments until August 31. During that time, their interest rates will remain at 0%.
Democrats stated that Americans continue to experience financial difficulties and should be relieved of the burden of repaying their student loan debts until at least the end of this year.
Senator Patty Murray stated last month that people are still having a hard time financially. Costs are rising, people are experiencing problems with their health and their finances, and on top of that, they have to contend with a “broken student loan system.”
Senator Murray also suggested that President Biden remove Americans in default from that position. The purpose would be to allow these people to have a fresh start now that the pandemic appears to be waning.
The St. Louis Federal Reserve Bank agrees with Murray. In March, the bank warned that requiring borrowers to make payments on their student loans again would be detrimental to those experiencing difficulties.
In contrast, Senator Joni Ernst (R-IA) has previously voiced her opposition to a potential extension of the student loan repayment pause.
“This is a shortsighted & unfair deal for the vast majority of Americans who didn’t take on debt & will ultimately be stuck w/ the bill. Let’s make sure students have a clear picture of these costs before they take out a loan w/ my STUDENT Act instead of forcing others to pay it,” she wrote in a tweet.
Ernst disavows the extension and has instead proposed new legislation with Senator Chuck Grassley (R-IN). The Student Transparency for Understanding Decisions in Education Net Terms (STUDENT) Act would not provide student loan relief. Instead, its purpose is to push students toward making better financial decisions before taking out student loans.
The STUDENT Act would potentially provide student loan borrowers with an estimated total of the interest they would pay on those loans. It would also implement a standard 10-year student loan repayment plan.
“Students and their families should have a clear picture about the true costs associated with their loans so they can fully understand how they’ll impact their future,” said Ernst. “Providing them with the tools to know what the real deal is with their federal student loans is commonsense and will help them make informed decisions.”
