Five questions about Biden’s move on freezing student loans

President Biden’s extension of a moratorium on federal student loan payments means millions of borrowers will start paying back what they owe for their education for the first time since the start of the pandemic just two months before the midterms in the fall. 

Biden moved the deadline from May until the end of August after sustained pressure from Democrats and outside advocates to keep the freeze going during a time of income uncertainty for many Americans.

While many of Biden’s allies support the decision — which followed a meeting with progressives last week — some in his own party have already criticized the move as not going far enough, restarting calls for him to fulfill a campaign pledge to cancel some of the debt.

Biden said the latest extension is meant “to enable Americans to continue to get back on their feet after two of the hardest years this nation has ever faced” and to allow them to achieve “greater financial security.”

The Hill was the first to report on the administration’s plans to extend the deadline this week. 

Here are five questions about Biden’s latest student loan pause.

How long will it last?

This extension will last until August 31. After that, borrowers with outstanding debt are expected to resume payments. Previously, borrowers were expected to restart payments on May 1.

The pause on such payments began under former President Trump, who put loan reimbursements on hold in March 2020 for at least 60 days. It has since been extended six times under both administrations.

Some Democrats, led by Sen. Patty Murray (D-Wash.), called on Biden to push the payment pause until 2023, which would put off repayments until after the November midterms. But Biden’s move pushes repayments to just over two months before the election, which some warned could spell political trouble.

“We know that you can’t pause a crisis, Biden can cancel the debt today with a signature. It would be political malpractice to restart payments right before the midterms,” said Thomas Gokey, an organizer with the Debt Collective.

What loans are covered?

The COVID-19-era moratorium covers federal student loan payments and any interest accrual. The first order, put in place by Trump, effectively froze some 40 million Americans’ debt, totaling $1.6 trillion. 

In each freeze, the Department of Education (DOE) directed loan servicers to grant forbearance to federal loan borrowers without accruing interest. The pause has applied to student loans held by federal government agencies, which doesn’t include private student loans.

During the Biden years, no federally held student loans have had to be paid back. Biden touted that “41 million Americans were able to breathe a little easier during some of the toughest days of the COVID-19 pandemic” because of him continuing the pause.

Democrats, including those on the left, noted this as a positive development.

Senate Majority Leader Charles Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.) and members of the Congressional Progressive Caucus in the House applauded the progress made so far, writing in a joint statement: “Since the start of the Biden-Harris Administration, no American has had to pay a dime on their federally-held student debt, and more than 700,000 borrowers have had over $16 billion in student debt canceled.”

Will it be extended again?

Biden appeared to imply that this will be the last extension, saying it allowed for additional time to assist borrowers as the country continues to recover. Starting in September, the Department of Education will “offer additional flexibilities and support for all borrowers,” he said.

White House press secretary Jen Psaki, however, hedged a bit, saying the administration will make an evaluation on a “range of factors as we get closer to that timeline” when asked if borrowers should expect to pay after August.

“We’ll continue to assess and what we look at — while, of course, the economy is in a better state than it was a year ago and we have a strong recovery, we also understand there are a range of impacts that are still longer lasting because of the pandemic, including the impacts on costs and inflation and this is part of the president’s efforts to help elevate that,” she said.

The DOE and White House officials have faced pressure the last two times the administration paused payments to do it again. Before December, the White House had all but ruled out another extension. This time, the decision came even closer to the deadline — just 25 days before payments were expected to resume.

Education Secretary Miguel Cardona said the agency will continue preparations “to give borrowers a fresh start and to ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”

What’s the latest on forgiveness?

The White House said that Biden has not dismissed a possible executive-level cancellation on student debt, after the president campaigned on forgiving at least $10,000 per person during the 2020 presidential campaign.

“He has not ruled out, but I don’t have any update on that. I would note that again, he would encourage Congress to send him a bill canceling $10,000 in student debt, something he talked about looking forward to signing on the campaign trail,” Psaki told reporters.

For months, lawmakers and left-wing activists have urged the president to cancel as much as $50,000 in debt per borrower, or to get rid of all of it completely. 

Schumer and Warren have been leading calls for the president to forgive the former amount, arguing that it would alleviate unnecessary hurdles for students post-graduation and create new opportunities for those otherwise saddled by debt. It would also help mitigate racial inequality tied to the price of the country’s costly education system, they contend. 

Activists outside of Capitol Hill have been even more forceful. Those advocating for total forgiveness believe that even getting rid of tens of thousands of dollars in existing debt for each student does not go far enough. They want any outstanding debt and interest accrued to be canceled through an executive action or legislation and have been calling on Biden and the Democratic-controlled Congress to move in that direction since he took office in January.

A year ago, Biden requested a memo from the Education Department to determine his authority to forgive student debt through executive action. Since then, the administration has not publicly announced if the memo is complete.

When Biden promised $10,000 forgiveness on the campaign trail, he cited Warren. 

“Young people and other student debt holders bore the brunt of the last crisis. It shouldn’t happen again,” he wrote in a tweet in late March that year.

While Warren, Schumer, and progressive leaders expressed support for the president’s immediate move this week, they also urged him again to help those most in need longer term.

“While the extension is welcome, a looming restart of student loan payments in September underscores the importance of swift executive action on meaningful student debt cancellation,” they wrote. “We continue to implore the president to use his clear legal authority to cancel student debt, which will help narrow the racial wealth gap, boost our economic recovery, and demonstrate that this government is fighting for the people.”

NAACP President Derrick Johnson, who has occasionally been critical of the administration, argued that if student loan payments can be delayed by over two years, they can be canceled. Other advocacy groups, like the Student Debt Crisis Center and MoveOn, also said the extension falls short and called for cancellation of debt.

When will we know more?

The DOE outlined its plans to be in contact with borrowers before the loan repayments restart, signaling traction in that direction for the first time in over two years. Officials said that during the upcoming five-month period, it will work to prepare borrowers and offer some help to restart their payments in “good standing.”

“During the extension, the department will continue to assess the financial impacts of the pandemic on student loan borrowers and to prepare to transition borrowers smoothly back into repayment,” according to a DOE statement. “This includes allowing all borrowers with paused loans to receive a ‘fresh start’ on repayment by eliminating the impact of delinquency and default and allowing them to re-enter repayment in good standing.”

Cardona stressed that the administration wants a “smooth transition” for borrowers to resume payments, the clearest sign to date that this pause is indeed likely the last.