Biden Sends Conflicting Signals About Student Loan Pause August Deadline - Student Loan Planner

The student loan pause is now entering its 27th month. Since March 2020, payments on government-held federal student loans have been paused, and interest accrual has been suspended. Collections efforts against borrowers in default on their federal student loans have also been halted, and the Biden administration is currently working to bring all federal student loan borrowers out of default through its “Operation Fresh Start” initiative.

The student loan payment pause and associated interest and collections relief were established under the CARES Act — emergency legislation that Congress enacted in response to the COVID pandemic.

The relief was supposed to last six months. But President Trump subsequently extended the relief several times, and President Biden followed suit after he took office. Biden’s most recent extension is set to end on August 31, 2022, meaning billing and normal interest accrual would resume again in September.

The administration has been sending conflicting signals about whether the student loan pause will be extended yet again beyond August 31. Here’s the latest.

Biden officials are non-committal on resuming student loan payments in September

In May 2022, Biden’s Secretary of Education, Miguel Cardona, said in an interview on MSNBC, “At some point, people are going to have to start paying what they can afford to pay.”

Cardona indicated that Federal Student Aid officials are conferring with the White House about “when to restart payment,” promising borrowers a “long on-ramp with clear information” before sending out bills to millions of borrowers who have not had to make payments in years.

Cardona’s comments followed White House Press Secretary Jen Psaki’s remarks earlier in April that were similarly ambiguous. Psaki told reporters then that the administration would “continue to assess” key economic measures “including costs and inflation” before deciding when to end the student loan pause.

“The Department of Education will look at that and a range of factors as we get closer” to August, she said — suggesting the August 31 deadline could very well get moved.

Taken together, these comments by top Biden administration officials strongly suggest that the August 31 end date for the payment pause is not set in stone, and officials are prepared to extend it again (if they decide to do so).

Other White House officials suggest link between student loan forgiveness and restarting student loan payments

While some Biden administration officials are hinting that an additional extension of the student loan pause may happen, other officials are suggesting that the resumption of payments may be tied to a new student loan forgiveness initiative.

White House officials, and President Biden himself, have been suggesting for weeks that the administration is considering some sort of broad student loan cancellation efforts through executive action.

However, nothing has been confirmed, and top administration officials have stressed that no final decisions have been made. Officials are reportedly looking at $10,000 in student loan forgiveness, with eligibility restricted based on a borrower’s income.

But earlier this week, White House advisor Brian Deese suggested that a new student loan forgiveness initiative could be tied to ending the student loan payment pause.

“When you look at the question of the macroeconomic impact [of student loan cancellation]… The resumption of payments would interact with any potential debt cancellation from a macroeconomic perspective,” he said.

The implication of Deese’s comments is that the White House may consider restarting student loan payments as an economic counterbalance to the broad cancellation of student debt.

Other considerations regarding student loan payment pause

There may be other factors at play as Biden administration officials consider whether to extend the student loan payment pause:

  • Midterm elections. Resuming student loan payments just weeks before major state, federal and local elections in November could be a political landmine for Democrats. The midterm elections will determine which party holds the House and Senate and key state governorships.
  • Implementation of key student loan relief initiatives is incomplete. The Biden administration has been working to implement sweeping new federal student loan relief initiatives, including the Limited PSLF Waiver and the IDR Adjustment. But the Education Department does not expect to complete implementation of these programs until this fall or winter — well after the August 31 expiration of the payment pause. Meanwhile, the Department has not even provided a timeline for its Operation Fresh Start initiative designed to bring millions of federal student loan borrowers out of default. If the administration wants to ensure these new programs are in full effect before payments resume, officials may have no choice but to extend the pause.
  • Establishment of anticipated new federal student loan program changes may be a year away. The Department of Education is working on new regulations to establish a new income-driven repayment (IDR) plan and to relax rules governing key programs like Public Service Loan Forgiveness (PSLF) and the Total and Permanent Disability (TPD) discharge program. But those new rules are not expected to be finalized and in effect until 2023.
  • Final thoughts

    Borrowers have no choice but to prepare for the distinct possibility that student loan payments will resume in September. But if the Education Secretary is to be believed, and the Biden administration genuinely wants a “long on-ramp with clear information” before ending the payment pause, it seems increasingly less likely that the administration can accomplish that in 90 days. Borrowers should continue to monitor updates from the administration as August 31 approaches.

    1 Lowest rates shown include auto debit discount. Advertised rates are for the Smart Option Student Loan for undergraduate students and are valid as of 7/22/2021.

    Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. Payments may be required during the grace/ separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.

    1 Lowest rates shown include auto debit discount. Advertised rates are for the Smart Option Student Loan for undergraduate students and are valid as of 7/22/2021.

    Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. Payments may be required during the grace/ separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.

    1 Lowest rates shown include auto debit discount. Advertised rates are for the Smart Option Student Loan for undergraduate students and are valid as of 7/22/2021.

    Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. Payments may be required during the grace/ separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.

    1 Lowest rates shown include auto debit discount. Advertised rates are for the Smart Option Student Loan for undergraduate students and are valid as of 7/22/2021.

    Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. Payments may be required during the grace/ separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.

    1 Lowest rates shown include auto debit discount. Advertised rates are for the Smart Option Student Loan for undergraduate students and are valid as of 7/22/2021.

    Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. Payments may be required during the grace/ separation period depending on the repayment option selected. Variable rates may increase over the life of the loan. Advertised variable rates reflect the starting range of rates and may vary outside of that range over the life of the loan. Advertised APRs assume a $10,000 loan to a borrower who attends school for 4 years and has no prior Sallie Mae loans. The borrower or cosigner must enroll in auto debit through Sallie Mae to receive a 0.25 percentage point interest rate reduction benefit. This benefit applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment, if available for the loan.

    Biden Sends Conflicting Signals About Student Loan Pause August Deadline - Student Loan Planner