Biden Takes Action on Student Loans
Editor’s Note: Since the writing of this article, the Biden administration has extended the pause on federal student loan repayment through December 31, 2022.
Extending the CARES Act Moratorium on Student Loan Payments
After his inauguration on Wednesday, President Joe Biden issued an executive order directing the Education Department to extend the CARES Act suspension of federal student loan payments and setting of 0% interest.
The moratorium, which was passed in March 2020 as the COVID-19 pandemic started to affect the US economy, paused the collection of payments and suspended interest accrual for borrowers who had government-held federal student loans.
The freeze on loan payments was first set to expire on September 30, 2020. But as the economic slow-down continued, the Trump administration extended the freeze twice. With the moratorium scheduled to expire again in less than two weeks on January 31, Biden has now extended it until September 30, 2021. The pause will impact roughly 41 million Americans.
This extension could impact you differently depending on if you have privately or federally held student loans. Not sure which kind of student loans you have? Find out the difference between private and federal student loans.
The Possibility of Student Loan Forgiveness
On Tuesday, the day before the Inauguration, incoming Director of the National Economic Council Brian Deese told reporters that the administration “want[s] to reduce the burden of these financial trade-offs.” Deese was referring to the choices some borrowers face between paying basic expenses like rent, groceries, and utility bills, or paying off student loan debt.
Deese has said the Biden administration is in favor of up to $10,000 of student loan forgiveness per borrower. This would need to be passed by the House and the Senate, where Democrats have a slim majority. Those who support this type of legislation say it will be challenging to achieve, but not impossible.
Coronavirus Looms Large on Day One
On his first day in office, Biden considered the significant financial impact the coronavirus pandemic has had on Americans. Along with the extension on the student loan payment moratorium, Biden extended a moratorium on evictions through the end of March.
Biden also instructed the Departments of Veterans Affairs, Agriculture, Housing, and Urban Development, and the Federal Housing Finance Agency (FHFA) to ban evictions on properties backed by their agencies. These departments will also continue accepting forbearance applications from mortgage-holders.
The Biden administration sees these coronavirus-related relief actions as first steps to be followed by further action. The president has also put forward a $1.9 trillion COVID-19 relief package proposal for Congress and the Senate to consider.
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