Again, student loans are going to be put on hold. This time, the payments will be put off until September.
As many as tens of millions of people are expected to get a new extension of the pandemic relief program from the White House.
People who have federal student loans will be able to put off paying until August 31, an administration official says. This is the latest extension of a pandemic relief measure that has been in place for two years.
This is the seventh time the pauses have been put on, and it comes less than a month before the payments were supposed to start again. It would affect tens of millions of people, including 35 million who haven't paid what they were supposed to. Those debts have not been growing in interest, and seven million people who are in debt have been given a break from having their paychecks garnished and other collection efforts.
During this week, an administration official says that the extension is likely to be announced, but he or she wasn't allowed to talk about the plans before they were announced.
Activists who want Vice President Biden to cancel at least some of the debt he owes won't be happy about the four-month delay. Before the midterm elections, the pause will come up again. It costs Americans $1.6 trillion in federal student loans, more than they owe on car loans, credit cards or other consumer debt that isn't for a home, like student loans.
Wisdom It's bad for the soul of the United States to have a lot of student loan debt, says N.A.A.C.P. national director of youth and college Cole.
He said, "With each and every payment extension, you make a better case for canceling it." "At this point, you should just stop it."
Some people in Mr. Biden's party agree with him. The Democratic Party leader is Senator Chuck Schumer of New York. Ayanna Pressley, a member of Congress from Massachusetts, and Senator Elizabeth Warren, a member of Congress from Massachusetts, have asked the president to cancel up to $50,000 in debt for each borrower through an executive order.
But Vice President Biden has said that he doesn't want to do that. He wants any debt cancellation to be done by law. Legislators who support the plan say they don't have enough votes. A plan to cancel $10,000 in debt for many borrowers passed the House in 2020, but it died in the Senate because of a lack of votes.
Even so, the administration is still talking about canceling the event.
As of right now, Joe Biden is the only president in history where no one has paid on their student loans for the whole time he's been in office. Biden's chief of staff, Ron Klain, told a "Pod Save America" podcast last month. We'll make a decision about whether or not to forgive some of our student debt when the payments start again before the payments start again.
Debt-cancellation advocates are torn between hope and frustration after hearing these kinds of things. There's no point in giving people "false hope" if they're not going to do it. Natalia Abrams, the founder of the Student Debt Crisis Center, says that.
The restart comes just two months before the midterm elections, which is a political mess for Democrats, says Lanae Erickson, the senior vice president for social policy at Third Way, a moderate Democratic think tank that supports some targeted student loan debt relief but not broad cancellation efforts. This is another political mess for them.
"There's a lot of pressure, even from the Senate majority leader, to just cancel all of the student loans," said Ms. Erickson, who works for the Senate. Administration: "The payment pause has now been linked to talk about canceling student loans, which makes it even more politically risky."
With inflation at its highest rate in 40 years, the extension could help the economy grow even faster by keeping money in the hands of people who can buy things with the money. That adds to the problem, because strong consumer demand has caused constrained supply chains, labor shortages, and a limited supply of housing to push prices up.
As a way to stop people from spending and keep prices from rising too much, the Federal Reserve raised interest rates for the first time since 2018. In May, the Fed is expected to do even more. A small amount of time could make it more difficult for the Fed to cool down demand, but this isn't very likely.
People in the White House aren't sure how loan payments will affect both the economy and people in general, said Ms. Erickson.
"The fact that we're seeing almost quarterly extensions at this point is likely to show that there are two forces pulling in different directions and this is the best they could come up with at this point."
As soon as the extension is over, it will be hard to start the debt collection process again.
The Education Department, which is the main lender for most people who borrow money for college, hires outside companies to do the work of collecting money. However, two of the most important contractors, Navient and the Pennsylvania Higher Education Assistance Agency, better known as FedLoan, have recently left because they were unhappy with the growing workload and what they thought was low pay. As a result, the Education Department has been forced to move the accounts of millions of borrowers to other loan servicers, a process that isn't over yet.
Servicers have also been having a hard time with the piecemeal nature of the payment moratorium and the often last-minute decisions about how long it should be. The freeze began in March 2020, when President Trump was still in office, as part of Congress's CARES Act. It was twice extended by Trump.
In one of the first things he did when he became president, Mr. Biden added to the payment freeze. In August 2021, he did it again, but this time until early in 2022. Education Secretary Miguel Cardona called it a "final extension," and it was. Biden added another three-month extension in December, just a few weeks before the bills were supposed to be sent. He said the pandemic had made it hard for people to pay their bills.
Servicers thought that payments would start again on May 1, so they hired more workers and started preparing for a lot of work. But some executives were frustrated when it became clear that they would have to put off their collection efforts again.