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Payments for federal student loans are set to resume in May, more than two years after they were suspended because of the coronavirus pandemic. But the Department of Education recently emailed unusual guidance to the companies that manage its $1.6 trillion student loan portfolio, calling into question that timing.
Do not contact borrowers about this May 1 deadline, the instructions say.
The email, obtained by NPR and first reported by Politico, didn’t explain why service providers should remain silent about the deadline, nor did it say the deadline would change. However, the order suggests that the Biden administration is considering another extension of the student loan payment freeze.
The department is required by law to contact borrowers at least six times before making repayments and to tell service providers not to make this contact at a time when it is legally permissible to do so should happen means that the administration can only delay this decision for so long.
This email comes just days after White House Chief of Staff Ron Klain indicated that the repayment pause could be extendedin an appearance on the podcast Pod Save America.
“The president will review what we should do with the student debt before the hiatus ends, or he will extend the hiatus,” Klain said.
NEW: @WHCOS Ron Klain on what the President will do about student debt:
“The President will review what we should do with student debt before the hiatus ends or he will extend the hiatus.” pic.twitter.com/izoc0dLaVW
— Pod Save America (@PodSaveAmerica) March 3, 2022
There is pressure from the left to forgive student debt
Klain’s words – “what we should do about student debt” – are a clear indication of the elephant in the room for Biden: him pledgedas a presidential candidate to forgive at least $10,000 in student debt per borrower, but his reluctance to date has frustrated many in his party.
Biden is now facing increasing pressure from his own left flank, with Rep. Ayanna Pressley, D-Mass., tweet recently“Student debt relief is a racial and economic justice issue” and “@POTUS must #CancelStudentDebt” – a tweet sent by Sen. Elizabeth Warren, D-Mass. dividedadding, “Grateful to be by your side in this fight.”
Even Senate Majority Leader Chuck Schumer has made Biden uncomfortable. After Klain’s comments became public, Schumer tweeted: “Today would be a great day for President Biden and Vice President Harris #Clear student debt.”
This pressure from other Democrats contributed to Biden’s last-minute decision in December to extend the Jan. 31 pause on repayments to the current date, May 1, even though the Department of Education had already begun sending notices to borrowers.
In fact, over the past two years, the department has sent nearly 385 million emails to borrowers alone alerting them to upcoming deadlines, only to see those deadlines fly by a half-dozen times as the Trump administration and then the Biden administration announced another extension. The result: confusion among borrowers.
Now comes this email to credit service companies in what appears to be an attempt to stem another spate of confusing borrower notices around another deadline that could evaporate.
There are risks associated with resuming repayments in May
Requiring tens of millions of borrowers to resume repayments in May poses great logistical and political risks.
Logistically, two mammoth student loan servicers, Navient and FedLoan, are terminating their federal contracts, leaving the Department of Education to shift millions of borrowers to other service providers. That could make it harder for some to get the help they need to change repayment schedules or monthly payments — not the kind of frustration Democrats want in an election season.
As for May’s biggest problem, as anyone with a calendar will tell you, it’s dangerously close to the November midterm elections. Asking borrowers to resume student loan repayments before this election offers Democrats little political advantage.
Additionally, Liberal Democrats, who have been pushing for debt relief, could see a return to repayment if Biden backs down on his campaign pledge, because there is little point in forcing borrowers — and the government — back into debt repayment and collection when debt relief is imminent . If Biden instead extends the deadline, even if he continues to avoid a cancellation decision, the pandemic hiatus will become a benefit of the election season for Democrats, not a liability.
“Joe Biden is the only president in history that no one has paid their student loans to during their entire presidency,” Klain said on the podcast, clearly a talking point for borrower voters.
And some borrower advocates, who have been pushing Biden hard to quit, are already lobbying for another extension of the repayment pause.
“This is one of those rare instances where business, politics, politics and common sense are all all pushing in the same direction,” Mike Pierce, executive director of the Student Borrower Protection Center, said in a statement to NPR.
“If every other aspect of post-pandemic American life is more expensive, student loans need not be. It appears that President Biden and Vice President Harris will recognize this and once again take a stand to protect people with student debt,” Pierce said in response to the message from the department’s email to credit servicers.
Biden’s conservative critics argue enough is enough
When interest and payments on student loans were first suspended under the CARES Act in March 2020, borrowers found themselves in the vise of the pandemic, and the pause enjoyed bipartisan support — as did efforts to keep it at least long enough for the economy to prolong the effects of the pandemic will recede and borrowers will get back on their feet.
Although inflation has hit another 40-year high, hiring is recovering. Critics of another extension also point out that the interest and payment freeze has cost the federal government, along with taxpayers, at least $95 billion.
This alleged extension “makes it clear that the President likes to use the narrative of a permanent pandemic to move forward [his] political preferences behind closed doors,” North Carolina Rep. Virginia Foxx said in a statement to NPR. She is the top Republican on the House Education Committee.
“Hard-working taxpayers are tired of having their backs broken by this President. Another freeze on repayments only creates injustices that inevitably target both taxpayers and responsible borrowers,” Foxx said.
In a statement to NPR, a spokesman for the Department of Education did not confirm that the moratorium would affect the 1 million borrowers who have saved tens of billions as a result of the extended student loan moratorium.
And yet, borrowers who want to know exactly when they’re likely to be able to resume student loan repayments will have to wait a little longer.
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