President Joe Biden could suspend student loans forever
Here’s what you need to know – and what it means for your student loans.
Here is a scenario that may excite student borrowers: a student loan payment stops forever. It wouldn’t just last 30, 60, or 90 days. Instead, student borrowers would not be required to make federal student loan payments — potentially on an ongoing basis. In this potential scenario, Biden could continue to extend the student loan payment pause through executive orders.
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Student loan payment break: no more extensions
Biden has extended the student loan payment break three times. Biden may extend the student loan payment break for the fourth time. For student loan optimists, Biden could offer both an extended student loan payment pause and student loan forgiveness this year. It would be a huge win for student borrowers who, like all Americans, are facing high inflation and two years of the Covid-19 pandemic.
Congress suspended student loan payments in March 2020 through the bipartisan Cares Act, a $2.2 trillion stimulus package. President Donald Trump has extended the student loan payment break twice in the final year of his presidency. This student loan relief grants several benefits to student borrowers, including:
- no mandatory federal student loan payments
- 0% interest rate with no further accumulation of interest; and
- No collection of defaulted student loans
Since Biden became president, student borrowers have not been required to make a single federal student loan payment.
Student loan relief forever
Progressive Democrats say student borrowers are not financially or psychologically ready to resume student loan payments on May 1, 2022. Sen. Elizabeth Warren (D-MA) has asked Biden to extend the student loan payment pause so that student borrowers can feel better prepared to start repaying. (210 organizations call on Biden to extend student loan payment pause). A recent survey found that 93% of student borrowers say they are unprepared to start repaying their student loan. Other progressives have called for extending the pause in student loan payments until the Covid-19 pandemic is over. While a perpetual freeze on student loan repayments is not common policy, Biden could continue to extend the student loan payment pause with executive action. Practically, Biden’s successor could decide to change policy and not renew a student loan payment break. However, as president, Biden could use the power of an executive order to continue extending student loan relief.
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Not everyone supports a student loan payment break forever
Republicans have already expressed opposition to any further extensions of student loan relief. For example, Sen. Tom Cotton (R-AR) said if Biden extended student loan relief for the fourth time, it would be a “terrible idea.” Similarly, Rep. Virginia Foxx (R-NC), the top Republicans on the House Education and Labor Committee, said the large-scale student loan cancellation was a mistake. Republicans view student loan relief as an increase in government spending. Likewise, they view the large-scale cancellation of student loans as a massive transfer of wealth.
Student loans: next steps
Biden could extend student loan relief for the fourth time. Although Biden did not issue an executive order, White House Chief of Staff Ron Klain hinted at the possibility of another short-term extension. That said, there are no guarantees. Currently, federal student loan payments are scheduled to restart on May 1. Theoretically, Biden could continue to extend student loan relief through multiple executive orders, creating a “forever” student loan payment pause. (Where Biden stands on student loan relief). Practically, Biden would not support a completed moratorium on repayment of student loans. Initially, it suspended student loan payments due to the Covid-19 pandemic. However, Biden champions economic recovery and job growth. If student borrowers benefit from a continued freeze on student loan repayments, some might see the White House as sending a mixed message. Pressure from moderate Republicans and Democrats could also impact the president’s decision. Finally, there are political considerations: student loan relief could be the reason the Democrats lose the midterm elections. Some may an extension of student loan relief would result in strong Democratic turnout. Others argue that increased student loan relief, coupled with any student loan forgiveness, could alienate independent voters.
The end of temporary student loan relief is scheduled for May 1. Prepare now in case there is no extension and make sure you know all your options. Here are some popular ways to save money and pay off student loans: