The federal student loan pause could soon come to an end. Many borrowers aren't ready.
Since March 2020, payments on federal student loans have been paused and the federal student loan interest rate has been set to 0%. This moratorium is currently scheduled to expire at the end of January 2022, meaning your loan payments could kick back in on Feb. 1.
But a recent survey of 33,703 student loan borrowers by the nonprofit 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.
The Department of Education is reportedly weighing an extension of the student loan pause, according to Politico — but in a press conference earlier this month, White House press secretary Jen Psaki said the Feb. 1 deadline was still on.
"The Department of Education is already communicating with borrowers to help them prepare for return to repayment," Psaki said. "It expires February 1, so right now we're just making a range of preparations."
Here's what experts say about the pause potentially ending soon — and why they think it may need to be extended again:
Many borrowers are still not prepared
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.
But according to Persis Yu, policy director and managing counsel for the nonprofit Student Borrower Protection Center, that might not be enough.
"We are extremely encouraged to hear that President Biden is considering an extension of the federal student loan payment pause," Yu says. "The payment suspension has been vital to ensuring that .... borrowers can keep their head above water."
Politicians like Senate Majority Leader Chuck Schumer and Senator Elizabeth Warren — and hundreds of organizations including the American Civil Liberties Union, American Federation of Teachers, NAACP and Student Borrower Protection Center — have asked Biden to extend the pause, arguing that borrowers and servicers are not prepared for loan payments to resume.
"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," Schumer said in a statement earlier this month. "Moreover, with omicron spreading, the uncertainty with what happens next demands at least one more extension of the student loan payment pause."
The arguments for and against restarting payments
The pause may have reshaped the public's understanding of the student loan crisis.
"We've learned a lesson here that doesn't go away just because we turn student loan payments back on," says Mike Pierce, executive director at the Student Borrower Protection Center. "And the lesson is: The government does just fine without our money."
The federal system used to rely on payments from borrowers to issue new student loans, he notes — but that isn't the case today. "Since 2020, the government has done just fine without taking money from student loan borrowers," says Pierce.
But not all experts believe in student loan cancellation or extending the repayment pause. For Beth Akers, a senior fellow at conservative think tank American Enterprise Institute and a staff economist at the Council of Economic Advisers under President George W. Bush, resuming payments could help prevent tuition costs from ballooning.
"It puts in place appropriate incentives so that we don't have a ballooning of the student loan crisis and rampant tuition inflation," Akers says. "Institutions are willing to charge any price, because students won't have to pay it anyway."
'Student debt voters' could influence the next election cycle
Pierce says Biden's political support could be damaged by resuming payments in February.
He points to the president's strong support from young voters, Black voters and women — all groups that are disproportionately impacted by student debt. For many of these voters, Biden's campaign promise to forgive up to $10,000 in student loans was crucial.
"2020 was the year where a 'student debt voter' became a real thing," says Pierce. "When Joe Biden delivers for those borrowers, he's going to reap the political rewards. And if he fails to do so, there are going to be consequences."
Biden hasn't yet issued any broad student loan cancellations, but his administration has forgiven some student loan debt for people with permanent disabilities and those who have been defrauded by their institution.
Eileen Connor, director of litigation for the Harvard Law School's Project on Predatory Student Lending, says these targeted movements are signs that the Biden Administration is "moving in the right direction, but they really haven't gone far enough or fast enough with the urgency that the situation requires, especially with the payment pause ending."
The student debt crisis is still here
There's plenty of time for Biden to follow through with widespread debt cancellations, but Akers says the administration's hesitance is a sign that the campaign promise may go unfulfilled without a push from lawmakers.
"I think we've learned that the Biden administration is not as sympathetic to the cancel student loan movement as they may have wanted us to believe during the campaign," she says. "Not that he wouldn't sign legislation if it came across his desk, but I don't think he's going to be a champion for it."
Since taking office, the Biden Administration has approved over $9.5 billion of student loan relief — a significant, but still relatively small, percentage of the more than $1.7 trillion worth of student loans that Americans still collectively owe.
"It just shouldn't be the case in this country that pursuing education should ruin your life," says Connor. "And that is what has happened to so many people."
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