If Biden extends his student loan exemption after September 30, here are 5 options.
Here’s what you need to know:and what does it mean for student loans…
The student loan exemption is expected to end on September 30, 2021. However, student loan borrowers and members of Congress are equally asking President Joe Biden to use executive powers to extend the student loan exemption at a later date. A recent poll showed that 90% of student loan borrowers say they are not ready to start paying off student loan from October 1st… Others say there were 18 months of student loan benefits as well as student loan cancellation. What Will Biden Do About Student Loan Benefits?
Here are five options:
1. Option # 1: Biden Does Not Extend Student Loan Benefits
The first option is the baseline scenario: Biden does not renew the student loan exemption after September 30, 2021. This means that federal student loan payments are due again starting October 1, 2021, and your normal interest rate will also resume. This is probably the last choice of many student loan borrowers, but in the absence of any announcements of extending student loan benefits (which has not happened yet), this seems to be the most likely scenario. Biden would argue that the economy is improving, jobs are high, unemployment is low, and vaccination rates are high. In addition, most student loan borrowers have not paid federal student loans since March 2020. Opponents of the decision say it could lead to an increase in student loan default if student loan borrowers are not financially prepared due to the Covid-19 pandemic.
2. Option # 2: Biden extends student loan exemption until October 31, 2021.
The second option is that Biden extends the student loan exemption, but only extends it for one month. This is a low-probability option because Biden is likely to either not last or to last for a longer period. The advantage of a one month extension is that student loan borrowers will have additional time to plan student loan payments. This can be especially helpful as the current student loan exemption is expected to expire in less than 90 days, and there have been no announcements of renewed student loan payments. The disadvantage is that not much will change in one month. Yes, this is extra time to get your financial life in order, but on the margins, it won’t help solve the broader issue of the Covid-19 pandemic and other financial problems.
3. Option # 3: Biden extends the student loan exemption until December 31, 2021.
The third option is to extend the student loan exemption until the end of the year. If Biden extends the student loan exemption, the end of the year would be a logical date and a clear marker for student loan borrowers. Under this option, student loan payments may resume from January 1, 2022. Hence, a three month renewal will make more sense than a one month renewal. Borrowers of student loans will also have more time to move back to paying off student loans.
4. Option # 4: Biden extends the student loan exemption until March 31, 2022.
The fourth option is to extend the student loan exemption until March 31, 2022. This is a six-month extension, favored by several members of Congress, including Senator Elizabeth Warren, Massachusetts, and Senate Majority Leader Chuck Schumer, New York. … These members of Congress say student loan borrowers need more time without student loan payments to financially recover from the Covid-19 pandemic. There is already a precedent for extending student loan benefits for such a period. For example, after President Donald Trump renewed the student loan exemption twice, Biden extended the student loan exemption for another eight months after becoming president. If Biden extended the student loan exemption to that date, it would mean approximately two years of student loan exemption without federal student loan payments and 0% interest rate. The dilemma for Biden is that such a long extension runs counter to his administration’s support for economic recovery. On the one hand, the financial situation will be so bad that student loan borrowers will not be able to afford student loan repayments. On the other hand, the economy is improving, businesses are reopening, jobs are being created. Perhaps the two ideas can coexist, but messaging can be tricky.
5. Option # 5: Biden extends student loan exemption until the end of the Covid-19 pandemic
The fifth option is that Biden will extend the student loan exemption until the end of the Covid-19 pandemic. This is another request from the same members of Congress who proposed an extension date of March 31, 2022. While this option may be preferable for student loan borrowers, it is an unclear term. What does “end of the Covid-19 pandemic” mean? Who makes this decision – President, Congress, Center for Disease Control (CDC), World Health Organization? Is this a data driven decision or just a subjective opinion? The mood is clear – set aside until the sky turns blue again – but determining when it will be can be challenging for both student loan borrowers and politicians.
Biden could have used any of these five options or an alternative. Again, the base case is that the student loan exemption will end on September 30th. Therefore, be prepared to start repaying your student loan again as early as October 1st. This is also an important time to get your student loan game plan. Make sure you understand all of the student loan repayment options. Here are some clever options: