The Biden administration announced today that it has extended the break on federal student loan payments to May 1, 2022. The previous extension, which was labeled by the Education Department as the last, was originally set to expire on Jan. 31, 2022.
Extension issued due to new COVID-19 variant
A statement by President Biden confirmed the 90-day extension to the federal forbearance period, setting May 1, 2022, as the new expiration date. “We know that millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments,” the statement reads.
The extension gives the administration more time to assess the impact of the rise in the omicron variant, stated the Education Department in a press release.
The Education Department also assured borrowers that it would use this time to further improve federal student loan servicing after many servicers have faced backlash – and even lawsuits – for alleged malpractice. Plus, the extension gives federal servicers more breathing room as they prepare for an overhauled repayment process and transitioning millions back to making their regularly scheduled payments.
“We are committed to not only ensuring a smooth return to repayment, but also increasing accountability and stronger customer service from our loan servicers as borrowers prepare for repayment,” Education Secretary Miguel Cardona said.
House Democrats urged Biden to extend the forbearance due to COVID-19 implications
Since the CARES Act was signed into law in March 2020, roughly 42 million federal student loan borrowers have had their payments stalled, federal student loan interest rates have been set to 0 percent and collections activities on defaulted federal loans have been halted.
Democrats have called on the president to extend the forbearance period in light of the economic crisis that many still feel as a result of the coronavirus. Earlier this month, a group of 14 U.S. senators sent a letter to the administration asking it to extend the interest waiver.
“Many are still dealing with financial challenges as our nation works to build back better from the COVID-19 pandemic,” the letter read. The senators claimed that the current interest waiver alone saves federal borrowers $5 billion a month, and that low-income borrowers in particular would benefit from an extended interest waiver.
On Dec. 8, Sen. Elizabeth Warren, Majority Leader Chuck Schumer and Rep. Ayanna Pressley sent a letter to President Biden requesting that he extend not only the interest waiver, but also the forbearance period as a whole “until the economy reaches pre-pandemic employment levels.”
The three lawmakers responded to today’s announcement in an official statement, applauding the administration’s decision to extend the forbearance period. “We’re pleased the Biden administration has heeded our call to extend the pause on student loan payments,” the statement reads. “Extending the pause will help millions of Americans make ends meet, especially as we overcome the omicron variant.”
Most Americans will benefit from extension, recent survey shows
A Bankrate and BestColleges survey from early December found that out of U.S. adults with federal student loans, 75 percent expected their finances to be negatively impacted once the forbearance period expired. Most used the period to bolster their savings or emergency funds, and more than a third reported that paying for necessary everyday expenses will be harder with the monthly payments.
One in 5 borrowers reported not having a plan for their student loans upon the original expiration. Borrowers should use this extended payment break to craft a plan and communicate with their servicer about the repayment options available come May.