Student Loan Payments: When Will They Resume?



Borrowers’ balances were effectively frozen for more than a year, with no federal loan payments required since March 2020, when Congress first sanctioned a suspension as part of one of its first major Covid relief packages.

During this time, interest stopped accumulating – the savings of the average borrower. about 2000 dollars during the first year – and collection of overdue debt were postponed.

The assistance is even more significant for those working in the public sector and may be eligible for loan forgiveness after 10 years. They still receive credit for those 10 years of mandatory payments as if they kept making them during the pandemic, as long as they still work full time for suitable employers.

Both the pause in payments and the waiver of interest are automatic, but only apply to federally owned loans. This covers approximately 85% of all federal student loans, including what are known as direct federal loans and PLUS loans, that parents borrowed on behalf of their children. It does not include some federal loans that are guaranteed by the government, but do not technically belong to them. As a rule, they were paid before 2010.

More relief is unlikely

The pause in payments was originally set for seven months, but was expanded by the Trump and Biden administration. It is unlikely to be extended again as the economy recovers.
President Joe Biden extended the exemption from January to October 1, and also suspended collection on overdue loans. made by private lenderspreviously excluded from protection.

But the effort isn’t enough for some Democratic leaders, including Senate Majority Leader Chuck Schumer and Massachusetts Senator Elizabeth Warren, who are calling for a sweeping waiver of $ 50,000 per borrower.

This step would be unprecedented, but memo lawyers from the Harvard Legal Services Center and its Predator Student Lending Project say the Department of Education has the authority to do so.
He may not have the support of the more moderate members of the Democratic Party. BUT study The Committee for a Responsible Federal Budget found that eliminating student debt would give relatively little boost to the economy, and that much of the relief would go to those with higher incomes, who tend to have more debt.

Biden resists calls for debt relief

Biden has so far resisted the pressure, but said he would support the decision of Congress to cancel the $ 10,000 per borrower. He instructed Education Minister Miguel Cardone to write a memorandum on the president’s legal powers to cancel the debt, White House chief of staff Ron Klein said. interview with Politico last month.
Biden did not include a student debt cancellation clause in his $ 1.8 trillion. American families plan which calls for free community colleges and expand Pell grants for low-income college students.

Since taking office, Biden has provided some loan forgiveness to defrauded borrowers who attended commercial colleges, changing controversial Trump-era policies. The move results in the cancellation of approximately $ 1 billion in student debt. During the pandemic, the administration also refused to process paperwork to obtain permission to forgive loans to disabled borrowers.


Source link