President Joe Biden reversed course on Wednesday and extended the freeze on federal student loan payments until May 1, citing the continuing impact of the pandemic.
In a statement, the president also said though job numbers are up, he recognized that millions of borrowers would still struggle to make their payments.
"Given these considerations, today my administration is extending the pause on federal student loan repayments for an additional 90 days – through May 1, 2022 – as we manage the ongoing pandemic and further strengthen our economic recovery," Biden said. "Meanwhile, the Department of Education will continue working with borrowers to ensure they have the support they need to transition smoothly back into repayment and advance economic stability for their own households and for our nation."
Biden also called on borrowers to prepare for the restart of payments by considering enrolling in one of the government's income-driven repayment programs.
The announcement of the extension was praised on Wednesday by lawmakers and borrower advocacy groups who have both been pressing Biden to extend the pause and cancel student debt via executive action.
The moratorium had started under former President Donald Trump as the economy faltered during the early days of COVID-19, and Biden continued it. All told, more than 40 million Americans have had nearly two years without required payments or interest on their collective $1.7 trillion in student loans. And the Education Department said in a statement the pause is expected to save 41 million borrowers about $5 billion a month.
The agency added that the additional time would reduce the likelihood of borrowers falling behind on payments.
"As we prepare for the return to repayment in May, we will continue to provide tools and supports to borrowers so they can enter into the repayment plan that is responsive to their financial situation, such as an income-driven repayment plan," said Education Secretary Miguel Cardona in a statement.
Biden repeatedly had broadcast the freeze would end on Feb. 1, but liberal Democrats and voters had pleaded with him to extend it or take some action to forgive their loans. Pressure ramped up last week to change course, and the president succumbed, as the omicron variant of COVID-19 took hold across the country.
And White House press secretary Jen Psaki said in a Wednesday press briefing that multiple factors led to the administration extending the pause, including the ongoing impact of the pandemic and discussions with Vice President Kamala Harris.
The move comes as the national economy is experiencing inflation but an unemployment rate of 4.2%, which is approaching the 3.5% rate in February 2020 – the month before the pandemic ravaged the economy.
For nearly two years, most student loan borrowers have been spared the obligation of making payments on their balances. Their interest rates have been frozen, and for the millions in default, collection calls have stopped.
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What about student loan forgiveness?
Widespread loan forgiveness is not part of the extension, but “it’s more likely to occur now than at any point in the past,” said Mark Kantrowitz, an author of five books on scholarships and financial aid.
Part of the challenge of loan forgiveness is the cost, which means any loan forgiveness would likely be limited to certain borrowers and would be capped.
Forgiving up to $50,000 in loan debt per borrower would cost more than $1 trillion, Kantrowitz said.
A scaled-back approach that would forgive $10,000 in debt would run $377 billion. If that relief was limited only to borrowers with $10,000 in debt or less, that plan would cost $75 billion. But it would still erase the debt of a third of student loan borrowers.
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Some Democrats, such as Senate Majority Leader Chuck Schumer and others, had called on the president to extend the moratorium while pushing for Biden to use his executive authority to cancel student debt.
And on Wednesday, Schumer, Sen. Elizabeth Warren, D-Mass., and Rep. Ayanna Pressley, D-Mass., praised the extension and said the payment pause had helped borrowers to "make ends meet, especially as we overcome the omicron variant." They also called on Biden to forgive up to $50,000 in student loan debt per borrower.
Biden had campaigned on forgiving up to $10,000 in debt per borrower, but he has since said any such action would have to come from Congress.
The White House doesn’t appear to be changing its stance. On Dec. 14, when asked by a reporter where widespread debt relief stood, Psaki said, “If Congress sends him a bill, he’s happy to sign it. They haven’t sent him a bill on that yet.”
Contributing: Joey Garrison
