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Federal student loan servicers have been told to hold off on sending out payment reminders to borrowers, according to two sources familiar with the matter.
The development suggests the Biden administration could be considering extending the pandemic-era payment pause on federal student loans yet again. The policy, which has been in place since March of 2020, allows people to forego making payments their student debt without accruing any interest.
Nearly all borrowers have taken advantage of the relief opportunity.
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The payments are scheduled to resume after Aug. 31, but the pause could be extended to 2023, sources say.
A spokesperson for the U.S. Department of Education said it continues to assess the impact of both the coronavirus pandemic and the economy on student loan borrowers. The Education Department will communicate directly with loan holders about the end of the payment pause when a decision is made, they added.
More than 40 million Americans are in debt for their higher education, owing an accumulative $1.7 trillion, a balance that far exceeds outstanding credit card or auto debt. A quarter — or more than 10 million people — were in delinquency or default on that debt prior to the pandemic. These grim figures have led to comparisons to the 2008 mortgage crisis.
The Biden administration is currently deciding how to proceed with student loan forgiveness, and it’s possible that it could make its announcement on debt cancellation at the same time as prolonging the payment pause, sources say.
Forgiving billions of dollars in debt could be time-consuming, and restarting the bills before the relief process has been completed would likely be a mess for lenders and borrowers alike.
Most recently, the White House was reported to be leaning toward canceling $10,000 in student debt for most borrowers, but it’s increasingly under pressure to go further. Politicians such as Senate Majority Leader Chuck Schumer, D-N.Y., and groups such as the NAACP have repeatedly pushed the president to wipe out at least $50,000 for all.
Wisdom Cole, national director of the NAACP’s Youth and College Division, has said that nixing just $10,000 would be “a slap in the face” for Black borrowers, who often have to borrow more than their white peers because of the racial wealth gap.
Yet sweeping student loan forgiveness will also likely anger many Americans, including those who never borrowed for their education or went to college. Some Republicans have said they will try to block an effort by President Biden to cancel the debt. Rep. Kevin Brady, R-Texas, ranking member of the House Ways and Means Committee, recently called student loan forgiveness “a giveaway to highly educated college grads.”
Overall, however, the majority of voters (62%) support student loan forgiveness, according to a poll by Morning Consult.