fter more than a two-year pause on federal student loan repayments, the moratorium—which former President Donald Trump signed into law in March 2020 and has been extended several times—is slated to expire on May 1. In that event, federal student loan borrowers will need to start repaying their loans again. Or maybe they won’t.
Politico reported that the Department of Education instructed companies servicing federal student loans to not send notices to borrowers in March. They were told that payments would resume in May. Because the Department is required to communicate with borrowers at least six times before payment obligations resume, according to NPR, Democratic congressional aides say this notice to loan servicing companies was likely the Administration’s way of signaling another extension.
Around the same time, President Joe Biden’s chief of staff, Ron Klain, indicated on a podcast that Biden was considering whether to use his executive authority to issue some federal student loan forgiveness “before the pause expires, or he’ll extend the pause.” (The White House did not respond to TIME’s request for comment on the status of Biden’s decision.)
Many Democratic Congressional aides claim that lawmakers, who for years have advocated student loan reform consider this extension an opportunity to get a long-term solution. “We can’t keep extending,” says one Senate Democratic aide, “without fixing things.”
Patty Murray, a Washington Democrat and the chair of Senate Health, Education, Labor and Pensions Committee, has been leading the battle in Congress. Patty Murray is pushing for the Biden Administration’s use of the one-year extension to the Forbearance Period to reinstate borrowers in good standing who had fallen behind before the moratorium. Her pushes include a replacement of income-driven student loan programs with one that is accessible to all student loans borrowers, a cap on monthly student debt obligations not exceeding 10% of discretionary earnings, and bolstering the Public Service Loan Forgiveness Program (PSLF), which allows conditional loan forgiveness to non-profits and federal, state, or local governments such as police officers and teachers.
The Department of Education’s draft proposal, the “Expanded Income-Contingent Repayment” program, which it published in November 2021, might be a starting point, though Murray’s plan goes further. This text would appear to expand on the existing student loan programs which permit eligible borrowers to pay back loans in amounts and on dates that are based on income and educational level.
Because these changes could all be accomplished through the regulatory rule-making process, according to one legislative aide, rather than through Congress, Biden would not need the approval of any Congressional Republicans to carry out Murray’s plans. “I’ve been very clear to the administration, to the Department of Education,” Murray said during a Wednesday roundtable, “that we need to put a pause on all of this until at least 2023, until we actually fix the student loan issues that are in front of us.”
This is a very popular suggestion
The Biden Administration’s next steps will affect the finances of some 37 million federal student-loan borrowers, for which payments average $393 per month. UnidosUS, Data for Progress, and the Student Borrower Protection Center published results from a survey on March 24. 59% expect significant changes in their financial situation when the forbearance period ends. 31% don’t expect to have to make major spending cuts. The impact of the forbearance period on them will be felt by another 10%.
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Democrats might also be thinking about the November midterm election. According to pollsters, Democrats will face a difficult task in maintaining narrow majority in both the House and Senate. Voters might be open to extended student loan relief. A Data for Progress poll found that 70% of Americans supported keeping the moratorium in place as of December. 88% supported the moratorium among Democrats while 71% and 48% respectively of Republicans and independents were in favor.
“Ending the pause on student loan payments is a thing that a relatively small minority of voters support,” says Mike Pierce, executive director of the Student Borrower Protection Center, a nonprofit that advocates on behalf of student loan recipients. “It feels like the people that are pushing the president to go that route are his political opponents. So it’s hard to infer anything other than this is just people playing politics and trying to score points.”
Political factors may also play a role in why Republicans lawmakers including Republican Senator Richard Burr (North Carolina) and GOP Representative Virginia Foxx (Va.), are anxious for the forbearance to be over. This is despite it being conceived by Trump Administration voters and that its continued existence is widely supported among all political affiliations. “The Biden administration owes Congress and the American people a plan that will address challenges facing student loan servicing companies and borrower confusion, and provide a clear timeline for when student loan payments will resume,” Foxx said in a January statement. “The Biden administration has had a year to come up with a plan, it is time to stop stalling.”
Meanwhile, progressives continue to press for cancellation via executive action of hundreds of thousands of federal student loan debts. In December, Senator Elizabeth Warren, Massachusetts’s Majority Leader, and Rep. AyannaPressley, Massachusetts sent a letter asking Biden to forgo federal student loans up to $50,000. Biden is refusing to accept the suggestion, but he is urging Congress to adopt a bill to forgive up to $10,000.
Restarting loan payments is a priority for lenders
It’s not just Republicans who want the forbearance period to end, though. The private and bank loan companies make money when people convert federal student loans into personal ones. This is because they can get lower interest rates, or better repayment options. Federal student loans were less popular than private because they were at 0%, and the payments could not be stopped during the forbearance.
Lenders that normally made more from the conversion of federal student loan to private loans increased their lobbying expenditures in comparison to the pre-pandemic period. According to Open Secrets tracking, Sallie Mae Corp spent $1760,000 lobbying Congress in 2021, as opposed to $1,290,000.00 in 2018 and $1.310,000 in 2019. Another private lender, SoFi Technologies spent $460,000 lobbying in 2021 compared to $220,000 in 2018 or $160,000 in 2020.
“Right now, there’s really no incentive for borrowers to refinance,” says a Democratic House aide. “Small and large banks are pissed about it.”
Private lenders would be pleased to end the forbearance, however it could hurt borrowers who have debts in multiple ways. In 2021, three of the biggest companies, Navient, Granite State and Granite State that had previously served federal loans stopped servicing them. This meant that those borrowers who were able to get loans through these companies had their balances transfered to other companies. It wasn’t seamless. Pierce claims that some borrowers were sent bills despite not having to pay them, given inaccurate information regarding the status of their payment pause and had trouble accessing student loan information after they tried to log into the portal for the company from which their loans were transferred. “If the system can’t handle a transfer like this when no one has to pay the bills,” says Pierce, “what does it mean when 35 million people have bills to pay?”
According to one Senate adviser, the answer is obvious. “Before we resume payments,” she says, “we need to make sure that they’re resuming payments in a system that works.”
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