Joe Biden announced the pause on federal student loan collections in the US will be extended until 31 August.
The pause on federal student loans first started at the beginning of the pandemic in March 2020 under the Trump administration. This is the seventh time the pause has been seen an extension since then.
“We are still recovering from the pandemic and the unprecedented economic disruption it caused,” Biden said in a statement Wednesday, adding that data from the Federal Reserve has suggested that if collections were to summarize, “millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans’ financial stability”.
Nearly 37 million borrowers have been affected by the pause, with a delay of $195bn of payments since the start of the pandemic, according to the Federal Reserve of New York.
In addition to the extension, the White House announced that borrowers who have defaulted or are delinquent on their loans will get a “fresh start” on their payments once collection resumes. Consequences experienced by borrowers who have defaulted on their student loans include having tax refunds withheld, wage garnishment and diminished Social Security benefits.
“During the pause, we will continue our preparations to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs,” Education Secretary Miguel Cardona said in a statement.
Advocates for those with student debt, who have been pushing the Biden administration to extend the pause for weeks, praised the continuation of the pause but noted that the five-month extension is too short for borrowers and for the Department of Education to get ready to restart collections.
“The pause is a temporary measure that should be in service of a long-term fix, or borrowers may be back in the same crunch four months from now,” Abby Shafroth, interim director of the National Consumer Law Center’s Loan Borrower Assistance Project, said in a statement.
The announcement of the extension also comes off the back of a rally held in Washington DC on Monday urging Biden to cancel student debt outright. Calls for Biden to cancel student loans have gained momentum over the course of the pandemic. At the end of March, dozens of Democratic lawmakers signed a letter Asking Biden to extend the pause until at least the end of the year and “provide meaningful student debt cancellation.”
US representative Alexandria Ocasio-Cortez, who signed the letter, tweeted on Tuesday that extensions could be read as “savvy politics” but still leaves borrowers with instability.
“I don’t think those folks understand the panic and disorder it causes people to get so close to these deadlines just to extend the uncertainty,” she tweeted.
Senate majority leader Chuck Schumer, who also signed the letter, said that the extension is “a very good thing” but added that Biden should move forward with broader debt cancellation.
“The president should go further and forgive $50,000 in student loans permanently. It’s a huge burden on so many people,” Schumer told reporters on Wednesday.
As a candidate for president, Biden supported the idea of canceling at least $10,000 of student loans per person. Since entering office, Biden has been mum on any plans to cancel student debt.
Last month, Biden’s chief of staff Ron Klain suggested that the administration was considering policies that go beyond a pause extension saying: “The question whether or not there’s some executive action on student debt forgiveness when payments resume is a decision we’re going to take before payments resume.”
George is Digismak’s reported cum editor with 13 years of experience in Journalism