Student loan-payment freeze extended as courts weigh debt relief
Washington — The Biden administration announced Tuesday that it will again extend a pandemic-era pause on payments for federal student loans as courts weigh the fate of its debt forgiveness program.
The payment pause, which was first implemented during the Trump administration and extended multiple times, had been set to end on Dec. 31. Officials had hoped to have forgiven some debt by then so borrowers' balances would be lower, or in some cases wiped altogether, before payments resumed.
But Education Secretary Miguel Cardona said the department will extend the pause again until the courts reinstate President Joe Biden's debt relief program or resolve ongoing lawsuits.
Payments will resume 60 days after the department is allowed to implement the program or the litigation is resolved, officials said. If that hasn't happened by June 30, payments will resume 60 days later or on Sept. 1, the department said.
"Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty," Cardona said in a statement Tuesday. "We're extending the payment pause because it would be deeply unfair to ask borrowers to pay a debt that they wouldn't have to pay, were it not for the baseless lawsuits brought by Republican officials and special interests."
The extension arrives as Biden is fighting multiple lawsuits seeking to overturn one of his signature economic policies.
The Biden administration last week asked the Supreme Court to reinstate its plan to cancel up to $20,000 in federal student loan debt for more than 40 million borrowers. The U.S. Court of Appeals for the 8th Circuit had granted the request of a coalition of six Republican-led states to impose an injunction on the plan amid ongoing litigation.
In a separate case, a federal judge in Texas on Nov. 10 declared the forgiveness plan unlawful. The Justice Department has asked the U.S. Court of Appeals for the 5th Circuit to put a hold on that ruling while the court considers the merits of the administration's appeal. Administration lawyers asked the court for a final ruling by Dec. 1.
The legal battles have left millions of student loan borrowers in the lurch. More than half of the eligible people had applied for Biden's loan forgiveness program before it was ground to a halt, with the Education Department approving some 16 million applications. Despite the hold on the program, the department over the weekend notified people that their applications were approved, assuring them the administration will discharge the debt if it prevails in court.
Civil rights groups and anti-debt activists have been urging Biden to refrain from restarting loan payments while the debt relief program hangs in the balance. White House press secretary Karine Jean-Pierre told reporters on Monday that the administration was examining all options.
"In the face of extreme greed and hypocrisy by the far-right, President Biden today is standing up for all Americans — middle-class and low-income families — who carry the heavy burden of student loan debt," NAACP President Derrick Johnson said in a statement Tuesday. "The impact this extension will have in the lives of those who have been targeted by predatory student loans cannot be overstated."
The extension means borrowers with student loans held by the Education Department will continue to see payments suspended without penalty or accrual of interest for the duration of the moratorium. Collections on defaulted loans will still be halted, and any borrower with defaulted federal loans whose wages are being garnished will receive a refund.
The moratorium was first instituted in 2020 because of the economic upheaval caused by the pandemic and was extended twice by the Trump administration and now six times by Biden's White House.
"Borrowers are drowning under student loan debt and the Biden administration is throwing them a lifeline as we fight MAGA Republicans in court," Senate Majority Leader Chuck Schumer (D-N.Y.) said in a statement. "The pause in payments and interest gives student loan borrowers more opportunity to pay down their debt and reach important milestones in life like opening a savings account, purchasing a home, and saving for retirement."
The Committee for a Responsible Federal Budget, a D.C.-based think tank, estimates that extending the pause for 60 days beyond June 30 would cost $40 billion, or $5 million each month in lost revenue from interest. That would bring the total cost of the student debt pause to $195 billion, according to the group.
"This is not the kind of policy taxpayers ordered, but it's all that's on the menu for the Biden administration," said Rep. Virginia Foxx (N.C.), the top Republican on the House Education Committee. "We need sane, fiscally responsible policies - not the haphazard decisions being served up by this White House."