The ‘alarming’ restart of student loan payments may cost you $85 billion.
Here’s what you need to know.
Student loan payments for federal student loans are scheduled to restart beginning February 1, 2022. (Prepare for the end of student loan relief). If these three members of Congress get their way, however, that won’t happen. Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA) and Rep. Ayanna Pressley (D-MA) are sounding the alarm about student loan payments. Here’s what it means for your student loans.
Restarting student loan payments will wreak havoc on 18 million Americans
In a letter to President Joe Biden, the three members of Congress write that the failure to postpone student loan payments beyond February 1, 2022 collectively will “strip” 18 million Americans of $85 billion. Those are the findings of The Roosevelt Institute, which conducted the analysis. Schumer and Warren have called on Biden to postpone the restart of student loan payments, which are currently scheduled to end on January 31, 2022. (5 worst things to do for your student loans). There have been various proposals to postpone the restart of federal student loan payments to March 31, 2022 and September 30, 2022. A group of senators this week said there should be no federal student loan payments until the Covid-19 pandemic is over, but didn’t specify a date. Schumer, Warren and Pressley write that the failure to postpone student loan payments beyond February will enable the student loan debt crisis to cripple the economy recovery, undermine the effectiveness of the American Rescue Plan, and create substantial stress for student loan borrowers.
Student loan forbearance saved student loan borrowers $110 billion
When Congress passed the Cares Act in March 2020, student loan borrowers got unprecedented student loan relief. This included no mandatory federal student loan payments, 0% interest on federal student loans and no collection of student loans in default. Through January 31, 2022, student loan borrowers will have enjoyed these benefits for 22 months and received $110 billion of student loan cancellation. This is in addition to the $11.5 billion of student loans Biden has cancelled as president. Schumer, Warren and Pressley say this student loan relief increased economic security, and allowed student loan borrowers to “invest in their families, save for emergencies, and pay down other debt.” They also cite a shocking new survey that found that 89% of student loan borrowers don’t feel financially secure to resume student loan payments in February. (That said, Biden won’t cancel student loans before student loan relief ends). If student loan payments restart on February 1, the members of Congress write that:
- student loan borrowers could still be impacted adversely by the Covid-19 pandemic, including the emergence of the Omicron variant;
- 9 million student loan borrowers in default could be subject to wage garnishment and other debt collection methods; and
- Black and Latinx households would face a disproportionate burden from resuming student loan payments.
That said, there are ways to get student loan relief even if student loan payments resume, including forbearance and deferment through the U.S. Department of Education. (Here’s how to qualify for automatic student loan forgiveness).
What this means for your student loans
If Schumer, Warren and Pressley convince Biden to postpone student loan payments, there would be serious ramifications for your student loans. For example, conceivably you wouldn’t owe any federal student loan payments starting February 1. You would continue to have a 0% interest rate for your federal student loans. You also wouldn’t be subject to debt collection if you student loans are in default. (Here’s how to get student loan forgiveness during the Biden administration). Will Biden postpone the restart of student loan payments? Like President Donald Trump before him, Biden extended student loan relief twice. However, Biden has said that this is the final extension and there are no plans to extend temporary student loan forbearance beyond January 31. While Biden could change his mind, there’s no indication that he will. (No, Biden won’t extend student loan relief again). Schumer, Warren and Pressley also reiterate their call for up to $50,000 of student loan cancellation, even as The Roosevelt Institute wrote that Biden should cancel all student loan debt through executive order. (Here’s who qualifies for student loan forgiveness right now). If Biden acts, the Roosevelt Institute argues, GDP would increase by $174 billion in the first year alone, with billions more each year. That said, Biden doesn’t support total student loan cancellation or even $50,000 of student loan forgiveness.
While anything can happen, your safest bet is to assume that your federal student loan payments are due starting February 1. Understand all your options for student loan repayment. Here are some popular ways to pay off student loans and save money: