Last week the United States Department of Education announced an extension of the pause on student loan repayments, interest and collections through Aug. 31 of this year.
The extension of the pause on repayments will allow borrowers additional time to plan for the continuation of payments after Aug. 31.
This additional time will allow the Biden administration to reassess the financial situation of the American economy and how students are being impacted by rising prices and inflation.
The newest extension will be the seventh time the pause on student loan repayments has been extended since March 2020.
Student loan repayments and interest payments were initially paused in March 2020 with the passing of the CARES Act to alleviate economic struggles brought about by the COVID-19 pandemic.
“As I recognized in extending the COVID-19 national emergency, we are still recovering from the pandemic and the unprecedented economic disruption it caused,” President Biden said, in a statement released by the White House on April 6. “If loan payments were to resume on schedule in May, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would face significant economic hardship.”
The date in which student loan repayments will restart after the extension ends varies across financial institutions.
Sallie Mae, a company which specializes in private student loans and financial planning, has stated the first date of repayment once the pause ends will vary from customer to customer for their institution.
Sallie Mae also advises customers not to ignore repayment notices once the pause ends, as doing so could lead to serious legal action including being reported to the credit bureaus, the entire unpaid balance being due at one time, and the withholding of the wages which will be sent to the loan provider.
The extension of the pause on student loan repayments highlights the recent movement towards total student loan forgiveness for eligible students in the U.S.
As of April 2022, student loan debt in the United States totals $1.747 trillion. This massive amount of debt often acts as a barrier to other major financial decisions such as applying for a mortgage and owning a home, with 53% of millennials being unable to buy a home due to student loan debt.
Congresswoman Ilhan Omar and Congresswoman Alexandria Occasio-Cortez have been among the leading voices calling for the complete forgiveness of student loan debt.
Both representatives support and sponsor the Student Debt Cancellation Act, which if enacted would forgive outstanding federal and private student loans of all previous and current students in the U.S. education system.
Many advocates see the extension on the pause of student loan repayment as a step towards total student loan forgiveness, but others remain skeptical on the president’s ability to enact such a bill.
For more information on student loan repayments, students can visit the Federal Student Aid website here.
