A forever student loan pause? Why Biden is likely to continue freezing payments

BY Sydney LakeMarch 09, 2022, 9:49 PM
U.S. President Joe Biden speaks while meeting with business leaders and governors in the Eisenhower Executive Office Building in Washington, D.C., U.S., as seen in March 2022. (Photographer: Ting Shen—Bloomberg/Getty Images)

It’s been two years since student loan forbearance began in March 2020—which marked a freeze for borrowers to make debt payments. Forbearance has been extended several times but was set to expire on May 1. But Education Department officials told federal student loan servicing companies to “hold off” on sending notices to borrowers about those payments restarting, Politico reported this week. 

That’s the second hint in two weeks that the freeze on student loan payments could get extended again. Last week, White House Chief of Staff Ron Klain told Pod Save America that “the president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause.” 

There’s also the not-so-little issue of the midterm elections, which are about eight months away, and political pressure on President Joe Biden—even from other Democrats—to offer broad loan forgiveness.

Another extension on student loan forbearance could help out more than 40 million borrowers who hold a collective $1.61 trillion in federal debt. A survey of 23,532 student loan borrowers shows that 92% of employed borrowers are worried about being able to afford their payments come May 1, according to a survey conducted by Student Debt Crisis Center (SDCC) and Savi, a tech company that finds new repayment and forgiveness options for people with student loans. 

“Borrowers are still not ready to make payments. People may say that the economy is improving, but we asked borrowers and that’s not what they’re feeling with gas prices rising, inflation impacting their everyday purchases,” Natalia Abrams, president and founder of Student Debt Crisis Center, tells Fortune. “This is the last thing they need is to have their student loan payments be turned on.”

How politics factor into student loan forbearance

Every other extension on student loan forbearance has been related to a new wave of COVID-19 cases and other dire economic restraints. But this extension would be different, though, since there aren’t new major variants causing big surges in cases. 

“The Biden administration made the argument last time around that payments needed to be suspended due to the state of the pandemic,” Robert Kelchen, higher education professor at the University of Tennessee, Knoxville, tells Fortune. “The pandemic is now in a much better state, so the extension is either due to concerns about the economic situation of borrowers or for primarily political reasons during an election year.”

While borrowers may still feel as if they can’t afford to make payments, there are other plausible political and economic reasons for continuing the freeze. Starting payments again in May would mean reinstating student debt smack dab in the middle of a midterm election season.

“Delays in the restart of repayment are now being driven by politics, not policy,” Mark Kantrowitz, a federal student loan expert and author of How to Appeal for More College Financial Aid, tells Fortune. “They may want to extend the payment pause further, as voters who favor student loan relief outweigh voters who are opposed. The voters who are opposed are quite vocal in their opposition, but the political calculation seems to favor an extension.”

Will the payment pause be forever?

Assuming the extension is politically motivated, it’s unlikely that the expiration would happen before midterm elections on Nov. 8, Kantrowitz says. Plus, if student loan forgiveness is still an option, the administration wouldn’t want to restart payments in May “only to forgive the student loans a few months later,” he adds.

While it’s impossible to know exactly when or if payments might resume, some student loan experts believe that we could be looking at a long freeze ahead. 

“To put it simply, if payments don’t resume on May 1, I don’t think the Biden administration will ever resume payments unless they are forced to by a court,” Kelchen says. “Republicans are likely to respond by seriously trying to end the federal student loan program the next time they’re in charge.”

What about student loan cancellation?

Cancellation is still on the table. On his presidential campaign trail, Biden said: “We should forgive a minimum of $10,000 per person of federal student loans.” With one year of the presidency under his belt, Biden has forgiven more than $15 billion in federal student loan debt, although there’s a whole lot more to go.

There are lingering questions about Biden’s authority to cancel student loan debt, and he’s also been noticeably quiet about the topic. During a recent press conference, he ignored a question posed by a reporter about canceling student debt, and he didn’t broach the topic during his State of the Union address last week. 

Still, Cody Hounanian, executive director of the Student Debt Crisis Center, says he believes that the longer payments are paused, the more the administration will recognize the benefits of broad-based debt cancellation. 

“While this pause has just been a Band-Aid, it’s also been a test case for permanent cancellation. The benefits have been enormous,” he says. “I think that an extension here gives the administration an opportunity to better understand these benefits and better strategize how to get this done—to cancel student debt.”

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