New economic data released on Friday showing record levels of inflation is putting additional pressure on President Biden to extend the soon-to-expire student loan payment pause.
Student Loan Payment Pause Ends In 52 Days
For much of the last two years, federal student loan payments have been suspended, along with interest accrual. Congress had originally intended for a six-month pause in student loan payments, but former President Trump and President Biden extended the relief several times. Biden’s most recent extension ends on January 31, 2022. Administration officials have repeatedly characterized this as the “final” extension of student loan relief.
Record Inflation: Advocates Demand Extension Of Student Loan Pause
New economic data released on Friday showed record levels of inflation, with the Consumer Price Index increasing by nearly 7% percent this year through November. This is the fastest jump since 1982. Prices for various goods and services continue to increase.
Advocates for student loan borrowers seized on the alarming numbers to demand that President Biden grant another extension of the student loan pause. “Today’s economic data make the strongest case imaginable for a change of course as the Biden Administration rushes headlong into a hasty and poorly timed restart of the entire student loan system,” said Student Borrower Protection Center Executive Director Mike Pierce in a statement. “American families today are being forced to pay more to meet their basic needs, as rent, food, and energy prices skyrocket. Adding the burden of a student loan bill will stretch millions of families’ finances to the breaking point. Washington does not need this money; American families do.”
Earlier this week, a coalition of over 200 organizations advocating for student loan borrowers sent a letter to President Biden, urging him to extend the payment pause again in response to the rapidly spreading Omicron variant of the coronavirus.
“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,” wrote the coalition. “We… write to urge you to put a stop this crisis in the making before it begins and extend the current pause on student loan payments. 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.”
Lawmakers in Congress have also urged Biden to act. Senate Majority Leader Chuck Schumer (D-NY) told reporters earlier this week, “With Omicron spreading, the uncertainty with what happens next demands at least one more extension of the student loan payment pause.”
Surveys indicate that millions of student loan borrowers may not be financially prepared for student loan payments to resume. In a nationwide poll released last month, Savi and the Student Debt Crisis Center found that nearly 90% of borrowers are not financially positioned to resume repayment, and have relied on the payment pause to address other financial obligations. “When the payment pause ends on Feb. 1, borrowers will have the rug pulled out from under them,” said Natalia Abrams, president of the Student Debt Crisis Center, a student loan borrower advocacy organization. “We are especially concerned that the burden of loan payments will collide with other changes in the economy.”
Will Biden Act To Extend The Student Loan Payment Pause?
When the Biden administration was considering the most recent extension of the student loan payment pause earlier this year, officials suggested that they would consider both economic conditions and the state of the Covid-19 pandemic when deciding whether additional student loan relief was warranted. “Obviously, we’re going to always take the lead from what the data is telling us and where we are as a country with regards to the recovery of the pandemic,” said Secretary of Education Miguel Cardona in May.
After allowing for the most recent extension of the payment pause, however, Biden administration officials have been saying in no uncertain terms that this would be the “final” extension. The Department of Education and federal student loan servicers are moving full speed ahead with the resumption of repayment. Emails and other notifications are going out to borrowers. In its most recent batch of emails, the Department is warning borrowers, “Your student loan payments will restart after Jan. 31, 2022. You’ll soon receive a bill from your student loan servicer.” The emails go on to recommend an income-driven repayment plan, and suggests that borrowers may be able to streamline their application process by self-reporting their income. Biden had promised a newer and more affordable income-driven repayment option during his 2020 presidential campaign, but no such option exists yet. The Education Department’s recent draft proposal for a new income-driven repayment plan drew heavy criticism from borrowers and advocates during a negotiated rulemaking session earlier this week.
Administration officials have given no public indication that an additional pause for student loan payments is under consideration.
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