Five questions about Biden’s decision to freeze student loans

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President Biden’s extension of a moratorium on federal student loan repayments means millions of borrowers will begin paying back what they owe for their education for the first time since the pandemic began just two months before mid-term in the fall.

Biden moved the deadline from May to late August after sustained pressure from Democrats and outside advocates to keep the freeze during a time of income uncertainty for many Americans.

While many of Biden’s allies support the decision – which followed a meeting with progressives last week – some members of his own party have already criticized the move as not going far enough, reigniting calls for him to fulfill a campaign promise to cancel part of the debt.

Biden said the latest extension was intended to “enable Americans to continue to get back on their feet after two of the toughest years this country has ever seen” and allow them to achieve “greater financial security.”

The Hill was first to report on the administration’s plans to extend the deadline this week.

Here are five questions about Biden’s latest student loan break.

How long will it last?

This extension will last until August 31. After that, borrowers with outstanding debts should resume payments. Previously, borrowers had to start payments again on May 1.

The pause on these payments began under former President Trump, who suspended loan repayments in March 2020 for at least 60 days. It has since been extended six times under both administrations.

Some Democrats, led by Sen. Patty Murray (D-Wash.), have called on Biden to push back the payment break until 2023, which would postpone repayments past the November midterms. But Biden’s decision pushes repayments to just over two months before the election, which some say could lead to political unrest.

“We know you can’t suspend a crisis, Biden can cancel debt today with a signature. It would be a political mistake to start payments again just before the midterms,” said Debt organizer Thomas Gokey. Collective.

What loans are covered?

The COVID-19 era moratorium covers federal student loan payments and any accrued interest. The first order, put in place by Trump, effectively froze the debt of some 40 million Americans, totaling $1.6 trillion.

During each freeze, the Department of Education (DOE) ordered loan servicers to grant forbearance to federal borrowers without accruing interest. The pause applied to student loans held by federal government agencies, which does not include private student loans.

During the Biden years, no student loans held by the federal government had to be repaid. Biden boasted that “41 million Americans were able to breathe a little easier during some of the toughest days of the COVID-19 pandemic” because he continued the hiatus.

Democrats, including those on the left, noted this as a positive development.

Senate Majority Leader Charles Schumer (DN.Y.), Sen. Elizabeth Warren (D-Mass.) and members of the House Congressional Progressive Caucus applauded the progress made so far, writing in a joint statement: “Since the start of the Biden-Harris administration, no American has had to pay a penny on their federally held student debt, and more than 700,000 borrowers have seen more than $16 billion in canceled student debt.

Will it be further extended?

Biden appeared to imply this would be the final extension, saying it allows more time to help borrowers as the country continues to recover. From September, the Department for Education will “provide additional flexibilities and support to all borrowers”, he said.

White House press secretary Jen Psaki was a bit hesitant, however, saying the administration would make an assessment on a “range of factors as we get closer to that timeline” when asked if borrowers should expect to pay after August.

“We will continue to assess and from what we are looking at – while of course the economy is in better shape than a year ago and we have a strong recovery, we also understand that there is a range of impacts that are even more lasting due to the pandemic, including cost and inflation impacts and this is part of the President’s efforts to help elevate that,” she said.

DOE and White House officials have come under pressure the last two times the administration has suspended payments to start again. Before December, the White House had all but ruled out another extension. This time the decision came even closer to the deadline – just 25 days before payments were due to resume.

Education Secretary Miguel Cardona said the agency will continue preparations “to give borrowers a fresh start and ensure all borrowers have access to repayment plans tailored to their circumstances and financial needs.” .

What’s new on forgiveness?

The White House said Biden had not ruled out a possible executive-level cancellation of student debt, after the president campaigned to forgive at least $10,000 per person during the 2020 presidential campaign.

“He didn’t rule it out, but I don’t have any updates on that. I would note that again he would encourage Congress to send him a bill canceling $10,000 in student debt, something which he eagerly talked about signing during the election campaign,” Psaki told reporters.

For months, lawmakers and left-wing activists have urged the president to cancel up to $50,000 in debt per borrower, or get rid of it altogether.

Schumer and Warren have made calls for the president to waive the old amount, arguing it would reduce unnecessary barriers for students after graduation and create new opportunities for those otherwise in debt. It would also help alleviate racial inequities linked to the price of the country’s expensive education system, they argue.

Activists outside Capitol Hill were even more vocal. Those who advocate total forgiveness believe that even getting rid of tens of thousands of dollars of existing debt for each student doesn’t go far enough. They want any outstanding debt and accrued interest canceled through executive action or legislation and have called on Biden and the Democratic-controlled Congress to move in that direction since he took office in January.

A year ago, Biden requested a memo from the Department of Education determining his authority to cancel student debt through executive action. Since then, the administration has not publicly announced whether the memo is complete.

When Biden promised a $10,000 campaign rebate, he quoted Warren.

“Young people and other students in debt have borne the brunt of the last crisis. It shouldn’t happen again,” he said. wrote in a tweet at the end of March that year.

While Warren, Schumer and progressive leaders expressed support for the president’s immediate decision this week, they also urged him again to help those who need it most in the longer term.

“While the extension is welcome, an impending restart of student loan repayments in September underscores the importance of swift executive action on meaningful student debt cancellation,” they wrote. “We continue to implore the President to use his clear legal authority to cancel student debt, which will help close the racial wealth gap, spur our economic recovery, and demonstrate that this government stands up for the people. “

NAACP President Derrick Johnson, who has at times criticized the administration, argued that if student loan repayments can be delayed more than two years, they can be canceled. Other advocacy groups, like the Student Debt Crisis Center and MoveOn, also said the extension was insufficient and called for debt cancellation.

When will we know more?

The DOE outlined its plans to be in touch with borrowers before loan repayments restart, signaling traction in that direction for the first time in more than two years. Officials said that over the next five-month period it would work to prepare borrowers and offer help to restart their payments in “good standing”.

“During the extension, the department will continue to assess the financial impacts of the pandemic on student borrowers and prepare for a smooth borrower transition to repayment,” according to a DOE statement. “This includes allowing all borrowers whose loans have been put on hold to receive a ‘fresh start’ on repayment by eliminating the impact of delinquencies and defaults and allowing them to resume repayment in good standing.”

Cardona stressed that the administration wants a “smooth transition” for borrowers to resume payments, the clearest sign yet that this pause is indeed likely to be the last.

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