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Biden administration extends pause on federal student loan payments through January

Education Secretary Miguel Cardona speaks during a news conference at the White House on Thursday, Aug. 5. (Sarah Silbiger/Bloomberg News)

The Education Department said Friday it will extend the suspension of federal student loan payments through Jan. 31, 2022, marking the fourth time the agency has given borrowers breathing room amid the pandemic. The department says it will be the final extension offered to borrowers.

The moratorium was set to expire on Sept. 30, but Congressional Democrats had urged the Biden administration to push back the date as the public health crisis has left many Americans struggling to regain their financial footing. The Education Department had also pressed the White House for a final extension to help borrowers smoothly transition back into repayment, according to people familiar with the matter who spoke on the condition of anonymity because they were not authorized to speak publicly.

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Those efforts paid off.

“As today’s jobs numbers show, we have the tools that will allow us to beat COVID-19 and keep our economy recovering at a record rate,” President Biden said Friday in a statement. “But we know there is more work to do and the road will still be long for many people — especially for the one in six adults and one in three young people who have federal student loans.”

The final extension, said Education Secretary Miguel Cardona, “will give students and borrowers the time they need to plan for a restart and ensure a smooth pathway back to repayment.”

The Education Department said it will begin notifying borrowers about the final extension in the coming days, and provide resources about how to plan for the resumption of payments as the end of the moratorium approaches.

All borrowers with student loans from the Education Department will see their payments automatically suspended until Jan. 31 without penalty or accrual of interest. Each month until then will still count toward loan forgiveness for borrowers in public-service jobs. It will also count toward student loan rehabilitation, a federal program that erases a default from a person’s credit report after nine consecutive payments.

Collections on defaulted, federally held loans will still be halted, and any borrower with defaulted federal loans whose wages are being garnished will receive a refund. However, the directive still excludes millions of borrowers whose federal loans are held by private companies or universities.

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All told, 41 million Americans will benefit from the continued moratorium, according to the department.

News of the final extension was met with mixed reactions from lawmakers. Congressional Republicans blasted the administration for giving borrowers more time they don’t need.

“Students and families faced immense challenges last year, but the American economy continues to recover and there is no rational excuse for continued extensions of non-payment on student loans,” said Sen. Richard Burr (R-N.C.), the top Republican on the Senate Health, Education, Labor and Pensions Committee. “As vaccination rates continue to increase, Americans are returning to work and returning to their normal daily lives. Student loan repayments should resume as well.”

Virginia Foxx (R-N.C.), the top Republican on the House Education Committee, called Cardona’s move to extend the moratorium “nothing less than a dereliction of duty.” She and Burr have pressed the Education Department for its plan to resume loan repayment for the last several months, saying any further delay of restarting the system would only cost taxpayers more money.

Congressional Democrats, meanwhile, applauded the department’s decision, but some renewed calls for Biden to wipe away some of the $1.5 trillion in federal loans held by millions of Americans.

Senate Majority Leader Charles E. Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.) and Rep. Ayanna Pressley (D-Mass.), who have been at the forefront of the cancellation movement, issued a joint release urging Biden to take further steps.

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“We’re pleased the Biden administration has heeded our call to extend the pause on federally-held student loan payments, providing an enormous relief to millions of borrowers facing a disastrous financial cliff,” the lawmakers said. “While this temporary relief is welcome, it doesn’t go far enough.”

The trio, who have long pressed Biden to cancel up to $50,000 per borrower, argue that cancellation is “one of the most significant actions that President Biden can take right now to build a more just economy and address racial inequity.”

Although Biden has endorsed the cancellation of $10,000, he has expressed reluctance at upping the amount and questioned his authority in the matter. The Justice Department is reviewing Biden’s authority to take action, but House Speaker Nancy Pelosi (D-Calif.) said only Congress has the power. Still, more than 60 Democratic members of the House and Senate have urged Biden to grant widespread debt relief.

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Student advocates took a similar position Friday, with many praising the extended moratorium and insisting the White House must act on debt forgiveness. Others implored the Education Department to use the added time to ensure borrowers don’t fall through the cracks when payments resume.

The recent exit of two student loan servicers — Pennsylvania Higher Education Assistance Agency and New Hampshire Higher Education Loan Corporation — means millions of student loan accounts must be transferred to other contractors in the coming months. The department is also negotiating contract extensions and updating requirements for some student aid programs.

“There are too many moving parts to successfully start federal student loan repayment,” said Persis Yu, a staff attorney and director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “While the payment suspension is still in place, the President must take meaningful steps to improve the student loan system.”