A forever student loan payment pause? Pressure is mounting on Biden

BY Sydney LakeJanuary 05, 2022, 4:35 PM
President Joe Biden meets with members of the White House COVID-19 Response Team at the Eisenhower Executive Office Building in Washington, D.C., in January 2022.
Ting Shen—Bloomberg/Getty Images

Ahead of the holidays, President Joe Biden announced that the freeze on federal student loan payments would be extended once again—this time through May 1, 2022. Previously, the freeze was scheduled to stop at the end of January, but the Omicron variant of COVID-19 continues to strain the economy. 

“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 Dec. 22, 2021, statement. “Given these considerations, today my administration is extending the pause on federal student loan repayments for an additional 90 days—through May 1, 2022—as we manage the ongoing pandemic and further strengthen our economic recovery.”

While the extension adds to the reprieve for federal student loan borrowers, proponents of debt cancellation continue to push for further forbearance. Democrats including Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren, and Rep. Ayanna Pressley argue that the resumption of payments could be detrimental to our post-COVID economic recovery. 

Specifically, Warren—along with other Democrats—are continuing to push Biden to cancel up to $50,000 in federal student loan debt per borrower. There’s been debate about the president’s authority to do so, however, without an act from Congress. Warren and Schumer argue that Biden can achieve student debt cancellation by executive order, but Biden and Speaker of the House Nancy Pelosi disagree.

“You know how I know that President Biden has the power to #CancelStudentDebt? Because he’s already used it,” Warren tweeted on Dec. 20, 2021. “So did President Obama, and so did Donald Trump. It’s time for the administration to cancel $50,000 in student debt and give relief to people who are getting crushed.”

Fortune spoke with student loan experts to find out whether Biden’s latest extension on federal student loan forbearance will have any effect on his future actions.

Will Biden extend the freeze again past May?

When members of the Biden administration announced the previous extension that was to end in January, they called it the “final” such extension—which it proved not to be. 

“That seems to be an acknowledgement that nothing is ever really final in our current, unpredictable context,” Andrew Pentis, a student loan counselor and education finance expert with Student Loan Hero, tells Fortune. 

Pentis says that between inflation and Omicron “all bets are off” in terms of guessing whether forbearance may be further extended—but he thinks it’s unlikely.

Stacey MacPhetres, senior director of education finance at EdAssist Solutions, agrees, saying it’s difficult to know whether further extensions will be granted. 

“It is widely believed that this may be the last extension, but it is impossible to say without knowing what economic indicators will occur around that time,” she says.

Does this extension indicate that Biden might be further considering forgiveness?

Student loan experts agree that Biden’s openness to further debt relief is also unclear—although Pentis looks to his “track record” on student loan forgiveness, which has been made to targeted groups including borrowers who attended now-defunct institutions, borrowers with total and permanent disabilities, and public service workers.

“We have to ask ourselves: If the Biden administration wouldn’t steam ahead on student loan forgiveness in the wake of worsening inflation and the Omicron variant, what exactly would it take for him to move this mountain?” Pentis says. “The president has clearly zoomed past another potential turning point.”

What should borrowers do in the meantime?

MacPhetres recommends that borrowers consider continuing to make payments if they’re able to—doing so will help to reduce the principal balance on loans, she says.

“If the administration should move forward with full federal student loan forgiveness, any principal reductions a borrower made during this time of administrative forbearance will be beneficial to them in the long term,” she says. “This is also a good time for borrowers to tackle any other debt they may have, such as additional student loans or credit card debt, focusing on reducing these balances while taking advantage of the student loan administrative forbearance.”

For borrowers who don’t have the disposable income to do so, Pentis suggests waiting until May to resume payments on federal student loans. He warns that borrowers “shouldn’t wait to develop a strategy for resuming repayment, however.”

“Biden said this himself in the announcement of the moratorium extension, basically implying that he was throwing a bone to borrowers and expected them to do their part to get ready for payments come the spring,” Pentis adds. 

In his Dec. 22, 2021, announcement, Biden warned that borrowers need to prepare to begin to make payments come May.

“Take full advantage of the Department of Education’s resources to help you prepare for payments to resume; look at options to lower your payments through income-based repayment plans; explore public service loan forgiveness; and make sure you are vaccinated and boosted when eligible,” he said in a statement.

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