US: Student Loan Payments Pause to End on Sept 30, Biden Administration Says New Decision Will Be Made Soon

United States North America Higher Education News by Erudera News Aug 06, 2021

joe biden

As the current pause on student loan payments which took place in an effort to relieve the financial burden on US students amid the COVID-19 pandemic under the CARES Act passing in March 2020, is expected to end in September this year, the Biden administration officials have provided some information if the pause could be extended again.

During a press conference, Secretary of Education Miguel Cardona said that the borrowers would “very soon” receive information from the Biden administration about the issue of the repayment, reports.

“I don’t have any information today. But this is a priority for us. Borrowers are in need of information, and they are also in need of relief,” Secretary Cardona said.

However, advocates for student loan borrowers have voiced concerns over student loan servicers managing to handle payments and collections of over 30 million student borrowers, adding that such a shift has not happened before.

“There is a broad consensus among borrowers, advocates, industry, regulators, enforcement officials, and lawmakers that a rush to resume student loan payments is a recipe for disaster and will result in widespread confusion and distress for student loan borrowers,” an advocacy organizations coalition wrote in a letter earlier this year delivered to the Biden administration.

Furthermore, two Department’s contracted student loan servicers, FedLoan Servicing and Granite State Management & Resources, pointed out that there will be no contract renewal with the Department of Education, meaning that they will not continue to work as contracted student loan servicers for the federal government. As a result, the accounts of millions of student borrowers will be transferred to new student loan servicers.

Most recently, the Education Department has notified millions of student loan borrowers about such servicing changes, advising them to prepare, yet has not come up with a concrete plan over the issue.

According to a survey assembled by Student Debt Crisis and Savi this year, 90 percent of students pointed out that they are not ready to resume loan payments in the fall, while two out of three survey participants expressed skepticism that they will be able to start paying loans until September 2022.

With the postponement of federal student loan payments, student borrowers were not required to repay their obligations while interest rates had been reduced to zero.

Since March 2020, both former President Trump and President Biden have extended the moratorium a couple of times. The relief extension is expected to end this September, and borrowers will have to pay in October for the first time in 18 months.

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