On April 6, President Joe Biden announced that his administration would extend the student loan repayment pause through Aug. 31, 2022, allowing borrowers to delay making repayments for several more months.
Ashley texted to ask: “Would VERIFY be able to shed light on all student loans and these pauses that keep happening? Any idea on when Biden will implement the $10K loan forgiveness?”
We break down what to know about the current student loan pause and the proposals from Biden and congressional Democrats to forgive student debt.
The student loan pause began in March 2020 and suspended all payments due for federal student loans, stopped the accrual of interest on those loans and suspended involuntary collections to pay for those loans. The Secretary of Education, who is appointed by and answers to the president, has the authority to extend the pause.
The pause does not apply to private student loans. Private loans constitute 8.4% of the outstanding student loan debt in the U.S.
President Biden has insisted that any widespread student loan forgiveness go through Congress, although some congressional Democrats urge him to take action by executive order.
Biden pledged to forgive $10,000 in student loans for each borrower while on the campaign trail, and some congressional Democrats propose forgiving $50,000 for each student, but neither have happened yet.
The Biden Administration has forgiven $16 billion in student debt for 680,000 borrowers since the start of his term using programs that were already in place before his presidency began.
WHAT WE FOUND
When did the student loan pause start, and what does it do?
The pause on student loan bills began in March 2020 with the passage of the CARES Act, the first of the federal government’s COVID stimulus bills to become law. A portion of the bill was dedicated to temporary relief for federal student loan borrowers.
It required the Secretary of Education to suspend all payments due for student loans held by the Department of Education, stop the accrual of interest on all suspended loans and suspend involuntary collections to pay for student loans. The CARES Act also said that each month in which loans are suspended would be treated by loan forgiveness or rehabilitation programs, such as the Public Service Loan Forgiveness program, as a month in which the borrower has made a payment.
In practice, most borrowers have no monthly payments due when they check their federal student loan servicer’s account. Borrowers still have the option to make payments on their loans during the pause, and can even choose to opt back into monthly bills.
What happens when the pause ends?
The CARES Act dictates that, before the pause ends, the Secretary of Education must notify borrowers that their payments will resume and allow them to enroll in income-driven repayment plans.
Unless modifications were made to the loan terms, when the pause ends borrowers' loan repayments will resume as they were before March 2020.
When will the pause end?
Biden announced that his administration would extend the pause through Aug. 31, 2022, but the White House could continue to extend the pause beyond that date if it chooses.
The CARES Act directs the Secretary of Education, who is appointed by and answers to the president, to carry out the pause without the participation of Congress. The pause, which the CARES Act originally set to end on Oct. 1, 2020, was first extended to the end of 2020 by former President Donald Trump and then extended by Trump again through Jan. 31, 2021. When Biden first took office in January 2021, the acting secretary of education issued another extension “at the request of President Biden.” Biden has extended it multiple times since then.
What about private borrowers?
The Department of Education describes private student loans as all non-federal student loans, which includes loans made by lenders such as banks, credit unions, state agencies or schools. According to the Education Data Initiative, private loans constitute 8.4% of the outstanding student loan debt.
Private student loan terms and conditions are set by the private lender, not the federal government. Therefore, the federal student loan pause never applied to private student loans.
The National Consumer Law Center says the pause will continue to apply only to federal student loans that are currently held by the Department of Education, as well as to all defaulted Federal Family Education Loan (FFEL) loans.
Does the government have the authority to forgive student debt?
The federal government can choose to forgive federal student loan debt, but not private student loan debt. That’s because federal student loans are funded by the government with conditions set by law, whereas private student loans are funded by outside entities that set their own terms and conditions.
The Secretary of Education is granted by law the power to “suspend or terminate collection of a debt in any amount” so long as the debt is for eligible loans owned and managed by the federal government.
Each year, Congress grants the Department of Education a budget for administering student loans, based on the department’s budget request. The Department of Education uses this money to grant students new loans, and the borrowers’ repayments are accepted by the department as government revenue.
What are the proposals for forgiving student debt?
The two most discussed student debt forgiveness proposals would erase either $10,000 or $50,000 in federal student debt per borrower.
Biden has previously said he supports the $10,000 proposal, and pledged to go through with the plan during his presidential campaign. But since taking office, Biden has consistently insisted that a proposal should first be passed by Congress — a challenge given his party’s narrow margins in the House and Senate.
Some Democrats in both the House and Senate support a plan to forgive as much as $50,000 debt per borrower, and urge Biden to accomplish it through executive order. Sen. Elizabeth Warren has argued that Congress has already given Biden the authority to do this through the Secretary of Education’s authority to “compromise, waive, or release any right, title, claim, lien, or demand, however acquired, including any equity or any right of redemption” as granted by the Higher Education Act.
Proponents of widespread student debt forgiveness say it will help the economy by freeing up paychecks for millions of Americans, while those against student debt forgiveness say it moves the cost of the loans to taxpayers.
Legislation proposed during this session of Congress has stalled. White House Press Secretary Jen Psaki said in an April 6 press briefing that Biden had not “ruled out” forgiving student debt through executive order.
What’s been done already?
The Biden Administration has focused on canceling debt for certain types of borrowers through changes to preexisting programs. His administration has canceled loans for borrowers with total and permanent disabilities and borrowers who were harmed or lied to by their schools.
In February, the Department of Education announced the Biden Administration had discharged $16 billion in loans for 680,000 borrowers since the start of Biden’s term. The Education Data Initiative says 43.4 million Americans still owe $1.6 trillion in federal student loan debt.
Since the Biden Administration has discharged $16 billion of $1.6 trillion in nationwide federal student loans, he has cleared about 1% of the total federal student debt in the U.S.
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