When the coronavirus pandemic first swept the United States in March 2020, student debt relief was among the first policies enacted to help struggling Americans. The CARES Act, passed on March 27, 2020, paused federal student loan payments through Sept. 30, 2020 and temporarily set the federal student loan interest rate to 0%.
Both Presidents Trump and Biden extended the moratorium and payments are currently set to resume Jan. 31, 2022. Lawmakers and experts now warn another extension may be necessary.
A recent survey of 33,703 student loan borrowers by the Student Debt Crisis Center found that even among student loan borrowers with full-time employment, 89% say they’re not financially secure enough to begin making payments after Feb 1. And 21% say they will never be financially secure enough to resume payments.
Today, the Student Borrower Protection Center sent a letter to President Biden alongside 207 other organizations (including the American Civil Liberties Union, the American Federation of Teachers, and the NAACP) calling for the pause to be extended.
“In fewer than 60 days, tens of millions of student loan borrowers are slated to be thrown back into repayment on federal student loans they are ill-equipped to pay as the deadly Covid-19 pandemic continues to devastate Americans’ health and financial security,” reads the letter. “It is clear that payments should not resume until your administration has fully delivered on the promises you made to student loan borrowers to fix the broken student loan system and cancel federal student debt.”
The letter echoes a statement put out by Senate Majority Leader Chuck Schumer on Monday.
“We are still in the pandemic, and the borrowers were saving an average of $393 a month, which has been critical amid Covid,” said Schumer in a statement. “If we don’t extend the pause on payments, then that horrendous interest will pile up at a time when too many are still not financially prepared to shoulder a giant monthly bill. Moreover, with Omicron spreading, the uncertainty with what happens next demands at least one more extension of the student loan payment pause.”
“In all fairness to The [Biden] Administration, they did postpone it twice, and they said that that was the last postponement,” says Randi Weingarten, president of the American Federation of Teachers. “But given the uncertainty in so many people’s lives right now, we would join Senator Schumer in asking for that moratorium to be extended.“
The pause has provided significant relief for the roughly 45 million Americans who owe federal student loans. Credit scores among borrowers have increased and the Department of Education estimates that the policy collectively saved borrowers roughly $4.8 billion per month worth of accrued interest.
A letter from the White House sent to CNBC Make It reiterates the relief that the pause has brought to borrowers.
“As President, I am committed to making college more affordable and easing the burden of education costs and student loan debt for borrowers who need it most,” reads the letter. “That is why I extended the pause on federal student loan interest and repayments to provide breathing room for millions of Americans as we continue to pull ourselves out of the Covid-19 pandemic and rebuild our economy for all. Already, this action has effectively canceled nearly $100 billion in Americans’ student debt in the form of foregone interest payments.”
The letter additionally indicates the Biden Administration is “also continuing to explore other debt relief actions” and reaffirms the President’s willingness to “support legislation that provides $10,000 in debt relief for each borrower.”
While Mike Pierce, executive director at the Student Borrower Protection Center, says that broad-based student debt forgiveness is necessary, he says the pause on federal student loan payments has been a crucial stop-gap measure.
“The biggest win on student debt has been the continuation of the payment pause, something that Joe Biden did on day one and office and that he continued again over the summer,” Pierce tells CNBC Make It. “Telling tens of millions of people that they don’t have to worry about their student loan payments, is one of the most important anti-poverty initiatives of the Biden Administration. And we’ll look back on it as legacy-defining, as long as they’re able to keep this financial pressure off student loan borrowers.”
Pierce warns that student loan servicers are not prepared to have all borrowers flooded back into the system at once.
“We’ve heard from borrowers who’ve waited on hold for two or three hours just to get basic questions answered — and that’s right now, while payments are shut off,” he says. “When millions of people need to reach their student loan company to be able to get an affordable monthly payment or to be able to have paperwork processed, the system’s not going to be able to handle it. And the fact that the administration is choosing to restart payments all at once for everybody when they could just [extend the pause] seems to be totally inconsistent with everyone’s experience dealing with these companies.”
“It seems like it’s set up to fail.”