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There are growing signs that student loan borrowers may take longer before they need to resume their payments.
For more than 16 months now, payment of the bills of most borrowers has been suspended due to a break proposed by the US Department of Education due to financial problems caused by the Covid-19 pandemic. These payments are currently scheduled to start again in October.
However, according to experts, the issue of an extension is being considered.
“There is a lot of debate now about what needs to be done here,” said Scott Buchanan, executive director of the Student Loan Service Alliance, a trading group of loan servicing companies and their affiliates.
The recent change in the service of student loans could play into the hands of borrowers.
The Pennsylvania Higher Education Promotion Agency, which oversees loans to 8.5 million student borrowers, announced this month that he will not renew his contract with the federal government when it expires in December. As a result, all these borrowers will need to find a new lender.
“It will be difficult for PHEAA borrowers to resume repayment on September 30 and to change service personnel on December 14,” the higher education expert said. Mark Kantrowitz…
“It would be better to combine both changes so that they happen at the same time.”
There are already signs that the White House is considering expansion.
In an interview with the Association of Educational Writers in May, Education Minister Miguel Cardona said the government was deciding whether to give borrowers more time after September.
Meanwhile, Democrats and advocates are pushing for an extension.
Senator Elizabeth Warren, Massachusetts, and Senate Majority Leader Chuck Schumer, New York, sent a letter in June to President Joe Biden, urging him to maintain the suspension of payments until March 2022. This would mean that most borrowers would not have made a payment on their student loans in two years.
More than 120 organizations, including the American Civil Liberties Union, the National Consumer Advocacy Center and the Consumer Federation of America, also recently wrote to the president asking him to extend the pause in payments until student debt is canceled.
Experts believe that pause before deciding on forgiveness will reduce confusion for both borrowers and service personnel.
Biden has asked the US Department of Justice and the US Department of Education to reconsider his legal powers to write off student debt through executive action. These reports are still pending.
The decision about when to resume payments may also depend on how things are with the borrowers as the country emerges from the pandemic.
Those with student debt fought before Covid, with more than 1 in 4 in delay or default… After more than a year of record high unemployment, this pain has only intensified.
The unemployment rate for those with an associate degree stood at over 5% in May, up from 2.8% before the pandemic. About 3% of bachelor’s degree recipients are unemployed, up from 2.2% before Covid.
Congressional Budget Office recently predicted that the unemployment rate among young workers would improve more slowly than the general rate.
“Most likely, the pause in payments and the waiver of interest will be extended if the unemployment rate for college graduates has not yet returned to normal as of September 30, 2021,” said Kantrowitz.