Will federal student loan payments resume after August 31? Top Biden administration officials are hinting at yet another extension of the ongoing student loan pause. And any decision on a further extension of the payment pause may be tied to a decision on broad student loan forgiveness.
Student Loan Payment Pause Ends on August 31
The federal student loan payment pause is now entering its 27th month. The relief, established first by President Trump through executive order and then enshrined into law by Congress through passage of the CARES Act in March 2020, also froze interest. Only government-held federal student loans are covered, although a concurrent suspension on collections efforts against defaulted borrowers also applies to commercially-held FFEL-program federal loans.
The payment pause and associated other relief was originally intended to last six months. But President Trump, and subsequently President Biden, issued a number of short-term extensions. Biden’s most recent extension continues to August 31, with payments then scheduled to restart in September.
A Further Extension Of the Student Loan Payment Pause Seems Increasingly Possible
Biden officials have been suggesting for months that the August 31 deadline is movable. And in public comments earlier this week, Secretary of Education Miguel Cardona made clear that while no decisions have been made, a further extension of the student loan pause may happen.
“We recognize that while the economy has improved, many Americans are still struggling to make ends meet,” Cardona told senators at a formal subcommittee hearing. Cardona’s comments were made prior to the release of new economic data showing that inflation continues to rise at historic rates, with higher food and gas prices hitting consumers particularly hard.
Cardona told senators that while he does not have any concrete information on a decision about the student loan pause, “It could be that it’s extended. Or it could be that it starts [on September 1]. But what I will say is that our borrowers will have ample notice. And we’ll communicate that with you as well.”
With less than 85 days left before September 1, it is becoming increasingly unlikely that the Department of Education would be able to provide borrowers with “ample notice” about the resumption of student loan payments unless there is an extension.
Meanwhile, the Department is still making efforts to implement other significant student loan relief initiatives, most of which will not be completed before August 31. This includes the Limited PSLF Waiver program which is currently set to end on October 31, as well as a new IDR Adjustment initiative which is not expected to be in full effect until at least January. The Department is also in the process of implementing Operation Fresh Start, an initiative to bring all defaulted federal student loan borrowers back into good standing, but officials have provided no projected timeline on those efforts.
Biden Officials Link End of Payment Pause With Student Loan Forgiveness
Other top Biden administration officials have suggested that any decision on extending the student loan payment pause may be tied to a decision on broad student loan forgiveness.
President Biden and his top advisors have been increasingly signalling that some form of broad student loan forgiveness initiative is under serious consideration. While officials have repeatedly emphasized that no final decisions have been made, reports suggest that Biden has grown more comfortable with using executive action to enact $10,000 in student loan forgiveness for borrowers, with restrictions based on a borrower’s income. Advocates for student loan borrowers continue to push the administration to go further, however, with higher amounts of student loan cancellation and no limits based on income.
Last month, White House advisor Brian Deese indicated that the potential inflationary impacts of the student loan pause and broad student loan forgiveness would be a factor in the administration’s thinking. Deese suggested that any new student loan forgiveness initiative might be linked to resuming student loan payments following the end of the student loan payment pause.
“When you look at the question of the macroeconomic impact [of broad student loan forgiveness]… The resumption of payments would interact with any potential debt cancellation from a macroeconomic perspective,” Deese said. His comments suggest that the Biden administration sees restarting student loan payments as an economic counterbalance of sorts to wide-scale student loan forgiveness in the context of rising inflation. This week’s alarming new inflation figures, showing prices climbing by 8.6 percent through May, may only further reinforce this view.
Biden Delays Decision on Broad Student Loan Forgiveness
While President Biden had suggested in May that a decision on using executive action to broadly cancel student loan debt would be made in a matter of weeks, more recent reports now suggest that a final decision may not be made until closer to August 31 — further suggesting a link between an extension of the student loan pause and action on broad student loan forgiveness.
Notably, a decision in August would come only a couple of months before the midterm elections, and Democrats are facing strong headwinds in their efforts to retain control of the House and Senate. Given that polling shows fairly broad support for the student loan pause, turning payments back on shortly before a major national election could pose political problems for Democrats.