When Will People Have to Pay Student Loans Again?

Number of the Day: The most relevant or interesting figure in personal finance

NOTD - 6

That’s how many times the government has extended the deadline for mandatory student loan payments to begin again, with each reprieve raising questions about how much farther down the road the can will be kicked.

The pandemic-induced pause on the federal student loan program was prolonged again Wednesday when President Joe Biden said he was giving some 37 million borrowers with federal loans more time to get their finances in order before they have to resume payments, pushing the deadline to Aug. 31 from May 1. Payments were automatically paused during the deferral period for those eligible, and interest was set at 0%. Borrowers were free to continue making payments voluntarily, but no penalties or interest accrued if they didn’t.

Progressive politicians and groups representing borrowers have taken the position that enough is enough after more than two years of deferments, saying the repeated extensions show that Biden should proceed with his campaign proposal to forgive student debt. Biden called for $10,000 per borrower in forgiveness when he ran for president in 2020.

The latest pause is meant to give borrowers some more breathing room, since recent research by the Federal Reserve Bank of New York shows that many would be in financial trouble if forced to resume payments. It’s also meant to give the Department of Education time to get better organized. Student loan advocates and regulators have pointed out flaws in the management of student loan repayment programs, including income-driven repayment plans for low-income borrowers and the Public Service Loan Forgiveness program. The latter was recently expanded by the Biden administration to make many more public servants eligible for forgiveness.

“Today’s announcement was long overdue—in less than a month, tens of millions of people with student debt faced a financial catastrophe in the making,” Mike Pierce, executive director of the Student Borrower Protection Center advocacy group, said in a statement. “The Administration deserves credit for finally giving people room to breathe but today’s news should also be a reminder that the student debt crisis continues to loom over the financial futures of families across the country.”

Meanwhile, critics have said the pause and any potential forgiveness for borrowers is unfair to people who don’t have federal student loans. Americans for Tax Reform, a conservative group, said the student loan pause has helped high-income, highly educated borrowers while stoking inflation that has hurt people with low incomes. An analysis by the Committee For a Responsible Federal Budget, an anti-deficit think tank, said cancellation would make already-soaring inflation even worse.

Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.

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