A group of Democratic lawmakers are calling on President Biden to extend the pause in federal student loans as the country recovers from the pandemic.
In a letter signed by more than 60 members of Congress, lawmakers asked the president to extend the hiatus by at least six months, until the end of March – or whenever employment returns to pre-pandemic levels.
This is because millions of student loan borrowers will see their loan repayments invoices again starting in October. Interest rates on federal student loans were also set at 0% for the duration of the pandemic, but in October these rates will be reset to pre-pandemic levels. Lawmakers also want interest rates to remain suspended. They noted that the Department of Education has already provided approximately $ 72 billion in interest payments on student loans alone for 15 months, and that this money can be reinvested in the economy.
“The planned resumption of student loan payments in October could seriously hamper our economic recovery,” lawmakers warned. “Before the pandemic, the average student loan payment was between $ 200 and $ 299 per month – a significant chunk of the family budget and money that is desperately needed to meet basic needs.”
The Trump administration has initiated the first pause in the payment of federal student loans as the country’s pandemic has brought the economy to a standstill. Later, Mr. Biden extended it to 87% of borrowers of direct federal loans until September. However, according to the Department of Education, only about 500,000 direct loan borrowers gave up their payment pause as of the end of March – a small fraction of the 18.1 million borrowers a year ago who were still paying off their student loans shortly after the Law was passed. about CARES. passed last year.
“President Biden should cancel student debt, but in the meantime, he should extend the pause in payments so that borrowers do not suffer,” said Senator Elizabeth Warren, who, along with Senator Chuck Schumer and representatives Ayanna Pressley and Joe Courtney, spearheaded the effort.
“If this pause is not extended, it will not only hurt our country’s disadvantaged students, but it could also affect future economic growth and recovery,” said Schumer.
In the letter, lawmakers asked the president to act quickly because borrowers, the Ministry of Education and lending institutions will take time to prepare for any changes in current plans.
Earlier this week, Warren and Senators Ed Markey and Tina Smith also sent a letter to the CEOs of all federal student loan services asking what steps companies are taking to help get millions of borrowers back due this fall.
Lawmakers noted that borrowers who made automatic payments before the pandemic will see them resume in October unless they contact their loan providers in advance. The maintenance staff must notify the borrower just three weeks before the automatic payment of the borrower resumes.
“This creates a potentially catastrophic situation where borrowers can see auto payments resume with minimal warning, even if their financial circumstances have changed significantly,” the letter said. “If needy borrowers are forced to return to repay their student loans without any adjustments or support, they could be in default or in distress, facing catastrophic long-term economic consequences that will echo from generation to generation.”
At the same time, a group of Democratic lawmakers are urging Mr. Biden to cancel his student loan debt of up to $ 50,000, and the Biden administration is looking into the move to see if it has the legal authority to do so. Today it hasloaned student loans to borrowers defrauded by their schools and provided $ 1.3 billion in aid to borrowers with complete and permanent disabilities.
More than 42 million Americans have over $ 1.7 trillion in student loan debt. It is now the second largest consumer debt in American households after mortgages.