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Press Press Releases New August End Date for Student Loan Payment Pause Puts Pressure on Biden to Move Fast to Cancel Student Debt

New August End Date for Student Loan Payment Pause Puts Pressure on Biden to Move Fast to Cancel Student Debt

In the Meantime, New “Fresh Start” Program Will Help Protect Millions of People in Default

April 6, 2022 | WASHINGTON, DC — Today, the Student Borrower Protection Center released the following statement in response to the White House announcement that President Biden will extend the federal student loan payment pause until August 31, 2022. This is the fourth time President Biden has taken executive action to extend the pause on student loan payments, which were previously scheduled to resume on May 2, 2022.

In addition to announcing an extension of the payment pause, the White House announced that the U.S. Department of Education will take additional steps to give a fresh start to millions of struggling federal student loan borrowers, protecting them from the harsh consequences of default if payments resume in the future. This relief is critically needed for people living in or close to poverty.

This announcement also comes just days after an NPR investigation revealed widespread mismanagement of income-driven repayment, the Department of Education’s most important anti-poverty program for people with student debt. Recent public opinion polls and economic research forecast widespread financial distress among people with student debt if payments resumed as previously planned.

Statement from Student Borrower Protection Center Executive Director Mike Pierce:

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. 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.

Come August, people with student debt will have no one to blame but Joe Biden if they still remain trapped in America’s broken student loan system because he didn’t keep his promise to cancel student debt.

Statement from Student Borrower Protection Center Policy Director Persis Yu:

For too long, defaulted borrowers have slipped through the cracks and been made to suffer at the hands of the Department of Education’s punitive collection system, which forces them to forgo their wages, social security benefits, and Earned Income Tax Credits in retaliation for defaulting on their federal loans. We applaud the Biden Administration’s decision to pull millions of borrowers out of default and to give them a fresh start.

However, the Department must not squander this opportunity to fix the broken student loan system. Under this new swift deadline, the Department must work fast to end its punitive collection practices, ensure meaningful pathways for borrowers to get out of debt, and provide widespread debt cancellation.

BACKGROUND

Student loan borrowers with a federally held loan have not been required to make a loan payment since March 2020, when President Trump signed the CARES Act, pausing student loan payments and suspending interest charges for tens of millions of borrowers. This critical lifeline was extended via executive actions taken by President Trump in August and December 2020, and by President Biden in January 2021, August 2021, and most recently, this past December. It was set to expire with payments to resume for federal student loans on May 2, 2022.

There is a broad consensus among borrowers, advocates, industry, regulators, law enforcement officials, and policymakers that restarting student loan payments in May would have been a recipe for disaster unless it is accompanied by significant structural reforms and real, immediate debt relief.

In March, 210 organizations sent a letter to President Biden calling for the pause on student loan payments to be extended. Advocates warned that resuming payments would throw borrowers back into a system plagued by mismanagement, corruption, and abuse, even as new data shows that borrowers are not financially prepared to restart payments.

A copy of the letter to President Biden can be found here:
https://protectborrowers.org/wp-content/uploads/2022/03/FINAL-Payment-Pause-Coalition-Letter-March-2022.pdf

Before the pandemic struck, tens of millions of borrowers struggled to navigate a badly broken student loan system. America’s student debt crisis wreaked havoc on the financial lives of families across the country, despite payment relief and debt forgiveness programs that promised that these debts would never be a life-long burden.

Decades of structural inequalities and failed student loan policies have disproportionately burdened borrowers of color. Black and brown borrowers, in particular, are forced to take on more debt to get an education, have a harder time paying it off, and default at twice the rate of their white peers. In October 2021, Politico reported that the Department had been considering a plan to automatically pull more than 7 million borrowers out of default on their federal student loans, dubbed at the time “Operation Fresh Start.”

In a recent interview, White House Chief of Staff Ronald Klain acknowledged the extraordinary challenges facing people with student debt and claimed that “Joe Biden right now is the only president in history where no one’s paid on their student loans for the entirety of his presidency.” 

According to the latest tracking poll released by UnidosUS, the Student Borrower Protection Center, and Data for Progress exploring the effects of student debt on Latino likely voters, among respondents with student debt, a large majority expect to make “major changes to saving or spending” if student loan payments resume, including 6-in-10 Latino and Latina likely voters with student debt. In contrast, fewer than 1-in-5 likely voters with student debt, including a similar share of Latina and Latino likely voters, is “very confident” in their ability to make payments when they come due.

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About the Student Borrower Protection Center

The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.

Learn more at protectborrowers.org or follow the SBPC on Twitter @theSBPC.

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