The Biden administration has struggled with ending a pause on student loan payments as the economy’s recovery from the pandemic lows continues.
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President Joe Biden on Wednesday announced another extension of a moratorium on payments on federal student loans, this time through September.
This is the sixth vacation extension, spanning more than 24 months and two presidential terms. Borrowers have saved nearly $200 billion in that time, the Federal Reserve has establish.
The pandemic-era relief policy that freezes the bills of tens of millions of Americans with education debt was first established by the previous Trump administration in March 2020, as the coronavirus pandemic battered the US economy. standstill.
Nearly all borrowers qualify for a pause, with only about 1% of them continuing to pay, according to analysis by higher education expert Mark Kantrowitz.
While the country has made huge improvements since then, it would be risky to continue making student loan payments now, Biden said.
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The White House is expected to extend the pause on student loan payments through the end of August
“We are still recovering from the pandemic and the unprecedented economic disruption it has caused,” Biden said in a statement.
Restarting payments could “threaten Americans’ financial stability,” Biden said, recently quoted search from the Federal Reserve has forecast an increase in defaults and defaults as the bills begin to reopen.
Biden is also under great pressure to forgive student debt. On the campaign trail, he promised to cancel $10,000 for all.
Senate Majority Leader Chuck Schumer, DN.Y. and Senator Elizabeth Warren, D-Mass., are pushing him to cancel nearly $50,000 for each borrower.
Nearly 66% of voters are likely to support the president’s student loan forgiveness, with more than 70% of Latino and Black voters supporting, a recent poll shows. establish.
White House chief of staff Ron Klain last month said the administration wanted to reach a decision on debt forgiveness before moving the payments back.
“The president will consider what we should do on student debt before the pause expires, or he will extend the pause,” Klain said. speak on the podcast “Pod Save America.”
Even before the public health crisis, student loans were a major challenge for many households. Outstanding education debt exceeds $1.7 trillion, burdening families more than auto or credit card debt.
About 40 million people in the United States have loans from their school days, and more than a quarter are past due. The average balance is over $30,000.
However, the extension of the repeat payment pause will present its own problems for borrowers, warn Scott Buchananexecutive director of Student Loan Servicing Alliance, a trade group for federal student loan service providers.
“What else do borrowers believe or plan to do when the government keeps changing its mind?” Buchanan said. “When the inevitable resumption finally occurs, millions of borrowers will likely miss it and become broke because of the false expectations the government is currently setting.”
Kantrowitz said borrowers are unlikely to take the September restart date seriously at this point.
“The U.S. Department of Education has extended payment pauses and interest waivers so many times and with such late notice that no one will believe them when they actually restart repayment,” Kantrowitz said.
“They need to stop sitting on the fence about student loan forgiveness,” he added.
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