Borrowers’ balances have been virtually frozen for more than two years, with no repayment required for most federal student loans since March 2020. During this time, interest rates have stopped rising and debt defaults have risen to stand by. Both President Joe Biden and former President Donald Trump have taken steps to extend the pause. Biden had previously moved the resumption date to three different cases. When the Biden government extended the moratorium from September 2021 until the end of January 2022, it warned that it would be the final extension. But the president pushed back the date as Covid-19 cases rose during the winter. Recently, Biden has come under pressure from other Democrats and pro-consumer groups to move the date once again because of inflation and ongoing supply chain problems that make everyday items more expensive for households. Dozens of Democrats sent a letter to Biden last week urging him to extend the break at least until the end of the year.
Who benefits
Direct loans as well as PLUS loans, which are available to graduate students and parents on behalf of their children, are eligible for the allowance. Some federal loans that are guaranteed by the government but are not technically held by it, known as the Federal Family Education Loans or FFEL, do not qualify. In general, they were disbursed before 2010. Cessation of payments is even more important for those working in the public sector and may be entitled to a federal student loan forgiveness after 10 years. They are still receiving credit for these 10 years of required payments as if they were continuing to pay them during the pandemic, as long as they continue to work full time for the right employers. A recent analysis by the Non-Profit Committee on a Responsible Federal Budget found that cutting interest and payments – from March 2020 to the pre-determined due date of May 1, 2022 – would lead to debt relief equivalent to $ 5,500 per borrower. The analysis points out that this relief is largely due to the cessation of interest accumulation and has benefited doctors and lawyers – who tend to borrow huge sums of money for their degrees – more. The petition may underestimate the relief because it does not take into account the additional benefit received by those seeking a Public Service Loan Forgiveness from default. The shutdown costs the government about $ 4 billion a month, according to the Commission on a Responsible Federal Budget.
Some Democrats are pushing for student loan cancellation
A number of key Democratic lawmakers, including New York Senate Majority Leader Chuck Schumer and Massachusetts Sen. Elizabeth Warren, have pushed Biden to cancel a $ 50,000 student loan in general. Biden made it clear during the presidential campaign that he supported some federal student debt relief. But since taking office, he has resisted pressure to cancel the debt on his own by executive order. Instead, Biden urged Congress to pass legislation that cancels out $ 10,000 per borrower. He also suggested that the cancellation should exclude high-income borrowers, arguing last year that the government should not forgive debt to those who went to Harvard and Yale and Penn. The Biden government has also expanded existing debt write-off programs for borrowers working in the public sector, those who have been deceived by for-profit colleges and those who are now permanently disabled. These efforts have resulted in the cancellation of more than $ 17 billion in federal student loans, eliminating debt for more than 700,000 borrowers.
Preparing for repayment
The Department of Education has said borrowers can expect to receive a billing statement or other notice at least 21 days before their payment. Those who have set up automatic payments may need to notify the mortgage company that they want to continue. If federal student loan borrowers can no longer afford their monthly payment once they continue, they may be eligible for an income-based repayment plan. Under these plans, which are based on income and family size, the monthly payment can be up to $ 0 per month. This story has been updated with additional information. CNN’s Maegan Vazquez contributed to this report.
