After his tenure, President-elect Joe Biden will extend the coronavirus-era payment hiatus on student loans, a member of his transition team told reporters on Friday.
"On the first day, the president-elect will instruct the Department of Education to extend the existing student loan and interest break for millions of Americans with federal student loans," David Kamin, a Biden transition adviser, told reporters.
The student loan payments and collections hiatus expired on January 31, just 11 days after Biden took office. Congress failed to address the student loan payment hiatus in the $ 900 billion COVID relief package passed in December.
And uncertainty about whether the new government would extend the hiatus had some advocates and student loan firms feared officials would be faced with too short a window to start the operationally complex task of extending the freeze without some borrowers in involve administrative or financial problems.
"We were marching towards a cliff," said Persis Yu, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center. Yu and others have feared for months that, given the ongoing economic devastation caused by the pandemic, borrowers were financially unwilling to resume student loan payments.
"The fact that he intends to extend the first-day payment hiatus is certainly a huge relief," said Yu.
The announcement will also make it easier for servicers, the companies hired by the Department of Education, to manage the student loan repayment process in preparation for the complex task of moving forward to the date they need to collect payments from tens of million student borrowers, Scott Buchanan said , the executive director of the Student Loan Servicing Alliance, a trading group.
In practical terms, servicers cannot take steps to move the date until they receive official instruction from the Department of Education, Buchanan said. "This type of advance notice is useful for us to operationally ensure that we are ready to make it very smooth when it is officially communicated," he said.
"The big challenge for us was to be able to foresee what would happen here," he added.
Despite the reassurance offered to both borrowers and student loan companies on Friday, some uncertainty remains. Basically, how long a borrower will get a deadline for payments. Yu said she hoped the government would extend the freeze until at least September or maybe longer. (The Biden transition team didn't immediately reveal how long the break was being extended, but we'll update this story as we hear more.)
Also, to keep borrowers safe, a specific plan is needed to ensure a smooth transition to repayment, Yu and Buchanan said.
"No matter when the repayment begins, you can't just flip a switch," said Yu. "We need a plan."
"We need a cancellation before that happens," added Yu.
In his remarks, Kamin briefly addressed the question of how the Biden government would deal with the debt relief. "As the president-elect has been saying for months, he also supports Congress, which is immediately canceling $ 10,000 per person in student loan debt in response to the COVID crisis," he told reporters.
Democratic leaders have pushed Biden to go further. In September Senate Democrats Chuck Schumer and Elizabeth Warren called on the next president to use executive power to immediately wipe up to $ 50,000 in student debt. Some activists have urged Biden to cancel all student loans.
Since Biden's election, the debate has raged broadly over the idea of debt relief and whether Biden should do it or leave it to Congress instead.
Although the Georgia runoff results increase the likelihood of student rejection by Congress, Yu said she would like to see Biden use his executive powers to provide borrowers relief. For one thing, because the Democrats do not have a large majority, student debt relief through Congress is not a guarantee, Yu said. Additionally, lawmakers have a lot on their plate and no history of moving fast, she said.
"It is good to see the student debt settlement commitment reaffirmed. However, we believe that it is currently administratively required on the first day," said Yu. "If there is an action that the president wants to take that he already has authority to take, it makes sense for the president to just take it."