The Biden administration on Wednesday announced that it will continue to allow millions of Americans to put off their student loan payments as the US grapples with a surge of COVID infections driven by the new Omicron variant.
The move means federal student loan borrowers in the US won’t have to restart their debt payment until May 1, instead of the previous deadline of Jan. 31. Interest rates will also remain at 0% during the extension.
“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,” President Joe Biden said in a statement Wednesday.
His announcement comes amid pressure from some Democrats ahead of a tenuous midterm election cycle and as, according to the Department of Education, 41 million borrowers remain saddled with student loan debt in a pandemic that has continued to threaten a full economic recovery. Collectively, they hold more than $1.7 trillion in federal and nonfederal loans, according to the Institute for College Access & Success.
Just days before the announcement, the US surpassed 50 million COVID cases and 800,000 deaths, according to the CDC. New cases rose by 27% in the last two weeks, the New York Times reported. Some cities have resumed mask mandates or expanded testing options, but the fear of getting sick, as well as rising inflation and the lagging supply chain, are threatening to reverse the year’s economic progress.
About 6 in 10 college seniors who graduated in 2019 had an average student loan debt of about $28,950, according to a report by the Institute for College Access & Success. And the amount most borrowers owe has been increasing annually as a reflection of economic health and how much schools receive from state investment, the institute found. Low-income and Black students are also disproportionately burdened by loan payments — about half of Black bachelor’s degree graduates with debt struggle to make federal loan payments “even in good economic times,” a situation likely exacerbated by the pandemic, according to the report.
“Even though it was a bit confusing … it was still the right thing to do in terms of financial impact on borrowers,” the institute’s associate director of policy and advocacy Michele Streeter told BuzzFeed News.
She added that it’s reasonable for borrowers to feel upended by the way things “change on a dime” due to the pandemic and to not know if or when to make long-term financial plans.
“I’m glad they are not letting [politics] rule the day,” Streeter said. “If there are conditions that warrant another extension, regardless of the political implications … I would hope they continue to prioritize that.”
“This additional extension of the repayment pause will provide critical relief to borrowers who continue to face financial hardships as a result of the pandemic, and will allow our Administration to assess the impacts of Omicron on student borrowers,” Secretary of Education Miguel Cardona said in a statement.
“As we prepare for the return to repayment in May, we will continue to provide tools and supports to borrowers so they can enter into the repayment plan that is responsive to their financial situation, such as an income-driven repayment plan.”
A major issue for advocates like Streeter is a lack of clarity from the Department of Education on their plans for borrowers, she said.
“There hasn’t been clear communication,” she said, citing that advocates want an answer from the administration on whether borrowers who are in default — roughly 7 million — will be restored when repayments are restarted.
Meanwhile, a coalition of lawmakers who had asked Biden to cancel $50,000 in student debt for every borrower lauded the extensions.
“Extending the pause will help millions of Americans make ends meet, especially as we overcome the Omicron variant. We continue to call on President Biden to take executive action to cancel $50,000 in student debt, which will help close the racial wealth gap for borrowers and accelerate our economic recovery,” Rep. Ayanna Pressley said in a joint statement with Sen. Elizabeth Warren and Senate Majority Leader Chuck Schumer.
During the extension, Biden said his administration will work to prepare borrowers for the payments to come. The Department of Education said in its statement this would come through steps such as providing billions of dollars of relief for borrowers with disabilities and helping small business owners through the Paycheck Protection Program.