During the COVID-19 pandemic, the U.S. Suspended payments and interest on federal student loans, but with many Americans back to work and the economy looking brighter, those protections are set to end on Sept. 30, 2021.
Senate Majority Leader Chuck Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.), and Rep. Ayanna Pressley (D-Mass.) Are making a renewed push for President Joe Biden to extend the pause on student loan payments through March 2022, as well as permanently cancel up to $50,000 per person of loan debt.
“COVID created severe hardship for some and threw many others off their stride. To make borrowers repay their debt now would be unfair, would be harsh,” Schumer said Tuesday. “Give them a chance to recover, wait till the spring.”
About 30 million Americans are set to resume student loan payments at the end of September, Warren said Tuesday. The average borrower pays about $400 in student loan payments, Schumer noted, which is “too much right now for so many people.”
“The size of these payments for many borrowers is the size of their rent, their car payments, groceries, child care — that’s going to put a lot of people making hard choices,” Warren said.
Overall, about 44.7 million borrowers in the U.S. Owe roughly $1.7 trillion in student loan debt, both in public and private loans.
Starting in March 2020, the Department of Education temporarily suspended federal student loan payments and dropped the interest rate to 0% as part of the CARES Act. That temporary pause has since been extended multiple times.
Not all borrowers suspended their payments. About 2.5 million Americans took advantage of the 0% interest rate to pay off their loans over the past 18 months, according to data loan servicers recently provided to lawmakers.
While President Biden has so far resisted calls from other Democrats and student loan advocates to cancel any debt through executive orders, his administration has taken steps to wipe out debt for students from for-profit colleges and troubled schools. And the administration may be open to extending the payment pause. Education secretary Miguel Cardona said during a June hearing that the administration is considering extending the payment freeze again.
Extending the pause on student loan payments, may not only help borrowers, but also loan servicing companies. In responses to lawmakers’ questionnaires last month, loan servicers reported that they, too, have concerns about being prepared to restart payments because many will need additional staffing and resources to provide sufficient support.
Making the situation even more complicated is the fact that two major federal student loan servicers, FedLoan Servicing and Granite State Management & Resources, recently announced that they will be ending their contracts to service federal loans. That means nearly 10 million student loan borrowers will need to be transferred to a new loan servicer in the next few months.
It’s just one more reason some legislators are pushing for an extension. “In this moment of ongoing crisis, our families need every bit of help they can get,” said Pressley. “We need to alleviate their hurt.”
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