President Joe Biden plans to extend the student loan payment break by four months.
Here’s what you need to know — and what it means for your student loans.
Great news for student borrowers: the student loan payment break could now be extended until August 31, 2022. According to Politics, Biden could soon announce his fourth extension of student loan relief for more than 40 million student borrowers. (Student loan relief: Biden will decide this month whether to extend the student loan payment pause). The extension, which would be the sixth overall extension, means the following for student borrowers:
- no mandatory federal student loan payments;
- 0% interest rate on federal student loans with no interest accrual; and
- no recovery of defaulted student loans.
The White House has yet to make an official announcement, but we would expect it any day now. Currently, the student loan payment suspension is set to expire on May 1, 2022. Federal student loan payments have been continuously suspended since March 2020, when Congress passed the Cares Act, which provided historic student loan relief. . President Donald Trump has also extended the student loan payment break twice during his presidency.
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Student loan payment break: a big win for student borrowers
The people have spoken, and the president has responded. For months, progressive Democrats in Congress and advocates for student loan relief have pressured the president to extend the student loan payment break. Senator Elizabeth Warren (D-MA), for example, argued that if Biden did not provide more student loan relief, millions of student borrowers would face student loan default and other financial calamities. (Student loan payment pause: Senator says extending student loan relief is unfair to most Americans.) Other members of Congress have said the ongoing Covid-19 pandemic and continued financial uncertainty could put additional financial pressure on student borrowers and their families.
(Student Loan Cancellation Doesn’t Mean What You Think It Means)
At the same time, some lawmakers may be frustrated with a fourth-month extension. While they may encourage further student loan relief, many progressive Democrats have urged the president to extend student loan relief for a longer period. For example, Sen. Patty Murray (D-WA) has called on Biden to extend the student loan payment suspension through 2023. Other members of Congress, including Warren, have said student loan payments should be suspended. until the end of the Covid-19 emergency.
Student borrowers will save $20 billion
If Biden announces the four-month extension, student borrowers will collectively save $20 billion in student loan repayments. (The new proposal would extend the student loan payment break and cancel student loans). Why? The US Department of Education estimates that each month of this student loan relief saves student borrowers $5 billion in interest payments. Therefore, a four-month extension equates to $20 billion in savings. Since March 2020, student borrowers have saved $195 billion through this student loan relief. Federal student loan borrowers seeking income-contingent repayment or civil service loan forgiveness will also be able to count nonpayments during the student loan payment break toward student loan forgiveness requirements.
(Explosive Report Claims This Student Loan Service Deceived Student Loan Borrowers)
Will Biden extend the student loan payment break again?
Progressive Democrats such as Rep. Alexandria Ocasio-Cortez (D-NY) and Rep. Ilhan Omar (D-MN) have criticized the president for not acting sooner to extend the student loan payment pause. They warned that any failure to extend the student loan payment break could result in the Democrats losing the midterm elections on November 8, 2022. (If student loans aren’t canceled, student borrowers are threatening to vote out Democrats). Why? They argue that young Democratic voters feel disengaged and ignored, which could lead to low voter turnout — or voting for Republicans. This potential four-month extension ends on August 31, about three months before the midterm elections. For political gain, Biden may extend the student loan payment break a fifth time through November 2022. (Biden could extend the student loan payment break indefinitely).
Even with a potential extension of the student loan payment pause, this student loan relief is only temporary. Therefore, invest in a long-term student loan repayment strategy based on your financial goals and unique financial situation.
Here are some smart ways to pay off your student loans and free yourself from debt: