Biden Extends Student-Loan Payment Pause After Virus Surges
(Bloomberg) -- President Joe Biden extended the pause on federal student-loan repayments by another three months as the U.S. faces a fresh wave of Covid-19 cases from the omicron variant, removing a near-term threat to millions of Americans’ finances.
The move on Wednesday takes the moratorium on payments, interest and collections through May 1. Biden had initially extended the pause through September after he took office and then stretched the end to Jan. 31. The president had faced pressure from Democratic lawmakers to provide an extension.
“We know that millions of student-loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments,” Biden said in a statement. He urged students to take steps to “prepare for payments to resume,” including looking at lower payments, exploring loan forgiveness and getting vaccinated and boosted.
The latest extension will help 41 million people save $5 billion per month and it provides additional time for borrowers to plan for the resumption of payments and reduce the risk of delinquency and defaults, the U.S. Education Department said in a statement Wednesday.
Borrowers across the U.S. hold a cumulative $1.75 trillion in student-loan debt, 58% of which is held by women.
Continuing the extension means colleges aren’t given an incentive to lower costs, according to Michael Poliakoff, president of American Council of Trustees and Alumni, a nonpartisan nonprofit group committed to academic freedom and accountability in higher education. He said the administration must stop avoiding the root problem -- runaway college spending.
“This is another Band-Aid on a hemorrhaging wound. It will not heal the country. It will not cure the problem,” Poliakoff said. “This bill will ultimately come due and avoidance or outright student-loan forgiveness without substantial reforms will only incentivize college administrators to continue the unaccountable spree they’ve been on.”
Colleges aren’t on the hook for the debt and borrowers say they need help. In a November survey by the Student Debt Crisis Center, almost 90% of 33,073 respondents said they weren’t financially stable enough to resume payments.
The advocacy group said 39,000 of its supporters sent letters to the White House calling for the Biden administration to extend pandemic relief for borrowers.
“We full-heartedly believe that today’s news is a direct result of these actions and we will continue to amplify the voices of everyday Americans impacted by student debt to create real change,” Cody Hounanian, executive director of the Student Debt Crisis Center, said in a statement.
Biden has said he would consider a plan to cancel up to $10,000 in student-loan debt for individual borrowers. White House Press Secretary Jen Psaki said he is still waiting for Congress to offer a bill to that effect.
Senators Elizabeth Warren of Massachusetts and Chuck Schumer of New York, along with Representative Ayanna Pressley of Massachusetts -- all Democrats -- quickly praised the payment delay, but reiterated their push for Biden to cancel a larger amount -- $50,000 -- in student loans via executive order.
“Extending the pause will help millions of Americans make ends meet, especially as we overcome the omicron variant,” the lawmakers said in a statement. “We continue to call on President Biden to take executive action to cancel $50,000 in student debt, which will help close the racial wealth gap for borrowers and accelerate our economic recovery.”
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