US Secretary of Education Miguel Cardona said talks with the White House on Tuesday were ongoing and borrowers should have answers soon.
WASHINGTON — Student loan borrowers will learn about an extension of the student loan payment pause and possible debt relief “soon,” the U.S. Secretary of Education said in an interview Tuesday, but no decisions have been made yet.
The break expires on August 31st. With the deadline a little over two weeks away, borrowers and student loan providers are growing weary without guidance.
“We are in daily discussions with the White House and borrowers will hear from us directly and soon when a decision is made,” Secretary of Education Miguel Cardona told CBS News.
The White House has said Biden will make a decision by the end of August.
While it’s unclear whether Biden will issue widespread debt relief, it’s unlikely the president would resume making required payments so close to the midterm elections and with such little notice to borrowers. In late July, the Department of Education ordered student loan servicers not to contact borrowers about resuming payments, the Wall Street Journal and NBC News reported, suggesting an extension of the pause is likely.
The CEOs of at least two financial firms are preparing for the moratorium to last at least until January 2023. In the second-quarter earnings calls, heads of Navient and SoFi said they expected Biden to extend the pause and factored that into business forecasts. However, it is important to note that neither company offers federal student loans for the Department of Education.
“We’re having a hard time believing it won’t be extended,” said Jack Remondi, CEO of Navent, an analyst.
This is the next moratorium period during Biden’s presidency without an update — not counting when Biden extended the hiatus on his first day in office, which he committed to do during the campaign and before his inauguration.
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Student loan moratorium timeline
March 20, 2020: President Trump is initially pausing interest and payments on federal student loans
March 27, 2020: CARES Act extends hiatus to September 30, 2020
August 8, 2020: Extended until December 31, 2020
Dec 4, 2020: Extended until January 31, 2021
January 20, 2021: Extended until at least September 30, 2021
August 6, 2021: Extended until January 31, 2022
Dec 22, 2021: Extended until May 1, 2022
April 6, 2022: Extended until August 31, 2022
The White House said the issues of extending the payments pause and debt relief would be considered separately.
During the campaign, Biden supported the $10,000 per borrower waiver. But internal negotiations have dragged on for months, while some Democrats are urging the president to do more and Republicans are firmly opposed to any mass debt forgiveness.
So far, the Biden administration has taken a more targeted approach to debt relief, focusing mostly on students who attended for-profit colleges. After announcing an additional $4 billion for students this week at the now-defunct ITT Technical Institute, the administration says it has now approved nearly $32 billion in student debt for 1.6 million borrowers.
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When could it come into effect?
According to Politico, the Department of Education has drawn up plans for potentially sweeping debt relief on a scale unprecedented in the history of the federal student loan program.
If Biden gives the green light, the Department of Education is poised to forgive debt within weeks for many borrowers who have filed income information with the agency, documents obtained by Politico show borrowers who have already certified their income on income-based repayment schedules . While this applies to several million borrowers, most other borrowers would self-report their income to confirm their eligibility through the federal student aid website, Politico reports.
The plans show that the Department of Education is preparing to allow all types of student loans to be waived, including grad and Parent PLUS loans, Politico said.
Who would qualify?
According to the Washington Post, the White House is considering an income cap for loan forgiveness. Though nothing has been finalized, the Washington Post reported that the cap under consideration would be $125,000 or $150,000 for single applicants and $250,000 or $300,000 for married couples applying together.
More than three-quarters of borrowers would likely still qualify for forgiveness under those rules, according to CNBC.
Borrowers with private student loans should not experience any relief. Because their debt is held by private companies, these loans are not subject to the federal government’s payment pause or debt forgiveness.