On Friday, the Department of Education announced that the moratorium on federal student loan payments would be extended until January 31. However, the department emphasized that the current extension would be the “final extension”, and loan payments would continue to be collected normally on February 1. Prior to the announcement, the moratorium on payments was set to expire on September 30.
Secretary of Education Miguel Cardona issued a statement on the pause’s extension, saying that it had “been a lifeline that allowed millions of Americans to focus on their families, health, and finances instead of student loans during the national emergency.
“As our nation’s economy continues to recover from a deep hole,” Cardona continued, “this final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment.”
The four-month extension is a major victory for debt-relief advocates, including many Democrats in the party’s progressive wing, who had pressured President Joe Biden to extend the moratorium during the new surge of COVID-19 cases.
The moratorium on federal student loan payments began in March 2020, when a provision pausing payments through September 2020 was included in the CARES Act – better remembered for its distribution of $1,200 stimulus checks to most American adults. The Act also lowered interest rates on the payment to 0 percent for the same time period.
In September, as the moratorium was scheduled to expire, then-President Donald Trump extended it to January 31 via executive order, and once he entered office, President Biden again extended the pause until September 30.
Crucially, these pauses only affect public student loans. Many loans are privately held, owed to private companies rather than the federal government, whose right to declare a moratorium on private loans’ repayment has been hotly debated.
While supporters of debt relief have celebrated the extension, many have pressed President Biden for further changes. In a joint statement, Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA) pressed Biden to cancel $50,000 in debt for every student in the United States, arguing that such an action would decrease economic inequality and disproportionately benefit minority students.
Biden has historically not supported the $50,000 proposal, but has indicated that he would support a $10,000 decrease – a proposal which has failed to satisfy many advocates on Capitol Hill.
The Federal Reserve has estimated that Americans collectively owe $1.7 trillion in student loans, and many are incapable of paying, spurring calls for a bailout.