Biden administration to extend student loan payment pause on Day 1, transition officials say

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Once in office, President-elect Joe Biden will extend the coronavirus-era payment pause on student loans, a member of his transition team told reporters Friday. 

“On Day 1, the president-elect will direct the Department of Education to extend the existing pause on student-loan payments and interest for millions of Americans with federal student loans,” David Kamin, a Biden transition adviser, told reporters

The pause on student-loan payments and collections was set to expire on Jan. 31, just 11 days after Biden takes office. Congress didn’t address the student loan payment pause in the $900 billion COVID relief package lawmakers passed in December. 

And the uncertainty surrounding whether the new administration would extend the pause had some advocates and student-loan companies worried that officials would face too brief a window to set in motion the operationally complex task of extending the freeze without ensnaring some borrowers in administrative or financial headaches. 

“We were marching towards a cliff,” said Persis Yu, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. Yu and others have worried for months that borrowers weren’t financially ready to resume student-loan payments, given the continued economic devastation wrought by the pandemic. 

“The fact that he intends to extend the payment pause on Day 1 is certainly a huge relief,” Yu said. 

The announcement will also make it easier for servicers, the companies the Department of Education hires to manage the student loan repayment process, to prepare for the complex task of moving forward the date they’re required to start collecting payments from tens of millions of student loan borrowers, said Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a trade group. 

Practically, servicers can’t actually take the steps to move the date forward until they receive the official directive from the Department of Education, Buchanan said. Still, “that kind of advanced notice is helpful to us in operationally making sure that we are prepared to make it very smooth when it does get officially communicated,” he said. 

“The big challenge for us has been being able to anticipate what is going to occur here,” he added. 

Despite the assurance offered to both borrowers and student-loan companies Friday, some uncertainty remains. Most basically, how long borrowers will get a reprieve from payments. Yu said she hopes the administration will extend the freeze at least through September or perhaps longer. (The Biden transition team didn’t immediately provide information on how long the pause will be extended, but we will update this story if we hear more.) 

In addition, providing certainty for borrowers will require a concrete plan for providing a smooth transition back into repayment, both Yu and Buchanan said. 

“No matter when repayment starts, you cannot just flip a switch,” Yu said. “We need a plan.”

“We need cancellation before that happens,” Yu added. 

Kamin briefly addressed the question of how the Biden administration would approach debt cancellation during his remarks. “As the president-elect has said for months, he also supports Congress immediately canceling $10,000 in federal student-loan debt per person as a response to the COVID crisis,” he told reporters. 

Democratic leaders have pushed Biden to go further. In September, Senate Democrats Chuck Schumer and Elizabeth Warren urged the next president to use executive authority to immediately cancel up to $50,000 in student debt. Some activists have called for Biden to cancel all student loans. 

Debate has raged since Biden’s election over the idea of debt cancellation broadly and whether Biden should do it or leave it to Congress instead. 

Though the runoff election results in Georgia increase the likelihood of some kind of student cancellation coming through Congress, Yu said she’d like to see Biden use his executive authority to provide borrowers with relief. For one, student-debt cancellation through Congress is no guarantee, given that Democrats don’t have a sweeping majority, Yu said. In addition, lawmakers have a lot on their plate and don’t have a history of moving quickly, she said. 

“It’s good to see a renewed commitment to student-debt cancellation, however we maintain that doing this administratively on day one is what student loan borrowers need right now,” Yu said.  “Where there’s an action that the president wants to do and is already empowered to do, it makes sense for the president to just do it.”

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