Ahead of the August 31 expiration of the Covid-19 payment freeze, the Department of Education instructed student loan servicers to hold off on sending out billing statements. These would normally occur about 30 days before the end of the payment pause.
The payment freeze, which was first enacted in March 2020, has been extended six times as the country continues to recover from the pandemic. The delay in notifying borrowers has prompted speculation that the Biden administration will announce updates to the payment freeze by the end of next month, either extending the pause yet again or announcing a plan for more widespread student loan forgiveness.
Further details about the pause are expected in the coming weeks. The last time the payment freeze was extended, it was announced 24 days before the scheduled expiration. White House officials previously stated that a final decision about student loan forgiveness would likely be announced by the end of August.
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Will Biden Forgive Student Loans?
President Biden has expressed support for up to $10,000 of federal student loan forgiveness, with limits based on borrowers’ income. However, it’s a topic rife with legal questions and economic ramifications.
Biden faces intense pressure from Democrats to enact some type of forgiveness before the midterm elections this fall. Senators Elizabeth Warren (D-MA) and Chuck Schumer (D-NY) have publicly argued for up to $50,000 in loan forgiveness, which they say Biden could pass via executive order. However, Speaker of the House Nancy Pelosi (D-CA) disagreed, stating in July 2021 that student loan cancellation would require an act of Congress.
President Biden’s advisors are also seemingly divided on the topic. Some argue that voters who didn’t go to college never had student loans or have already repaid their student debt will be angered by any large-scale forgiveness. Others contend that debt cancellation is key to swaying young voters and low-income households right before the midterms.
High inflation levels have also complicated the matter. Critics argue that giving millions of borrowers extra cash in the form of debt cancellation would increase the demand for an already limited supply of goods.
The Department of Education has already enacted narrower debt cancellation under the Biden administration. At least $25 billion in loan forgiveness has been granted to 1.3 million borrowers. This includes debt forgiveness or cancellation for students defrauded by their schools, borrowers who are permanently disabled and applicants who’ve completed their Public Service Loan Forgiveness (PSLF) service agreements.
What Happens Next
Federal student loan borrowers can expect more information about the student loan pause and potential forgiveness in the coming weeks. When payments do eventually resume, borrowers should be enrolled in whatever repayment plan they were in before the pause was enacted.
If your finances have changed and you need a different repayment plan, contact your student loan servicer ahead of time to discuss your options.
Millions of borrowers may also find themselves making payments to an entirely new student loan servicer. Several loan servicers have ended their contracts with the Department of Education; as part of that process, your loans may have been transferred to a different company. This is a relatively common occurrence and you shouldn’t need to take action, but open any correspondence from your loan servicer to stay informed of changes.
If you’re not sure where your federal student loans stand after more than two years of paused payments, review your information now. Log in to your Federal Student Aid (FSA) account to view your loan balances, interest rates and loan servicer.