As Biden reflects on sweeping student debt forgiveness, urged to keep loans frozen
As President Joe Biden refrains from granting a sweeping student loan waiver, as he pledged during the campaign, members of Congress are urging him to give borrowers a stopgap.
Federal student loan payments and interest are expected to resume on October 1 after what will have been an 18-month pandemic hiatus, but lawmakers argue that neither borrowers nor their loan officers will be ready by then.
They’re asking Biden’s administration to extend the moratorium – perhaps so they can buy themselves more time to convince him with their plan to cancel $ 50,000 of student loan debt per person.
Democratic senators think they have a pretty persuasive argument that could give millions of Americans with student loans more leeway to cover their expenses and face other debts.
Senators: The suspension of payments has helped millions of people
The moratorium on student loan repayments has been in place since March 13, 2020, during the early days of the COVID crisis.
It was originally scheduled to expire after six months, but has been extended several times since then. With the current end date set for September 30, borrowers and agents are eagerly awaiting whether they will get another extension.
In a letter to Biden this week, Democratic Senators Elizabeth Warren and Edward Markey, both of Massachusetts, say borrowers have greatly benefited from the payment hiatus and have been able to pay off credit card balances and other debts, provide for their immediate financial needs and support their families.
According to Federal Reserve data, 45 million Americans currently share $ 1.7 trillion in student debt. They’ve saved about $ 72 billion in interest charges over the past 15 months of suspended payments, senators said.
Warren and Markey say loan services report that the moratorium has allowed nearly 2.5 million borrowers to write off their student loan debts completely.
It takes longer, say lawmakers
In their letter, senators say they would like to see the moratorium extended until at least March 31, 2022, to give Congress time to resolve issues with the federal student loan system.
“As the economy recovers from this unprecedented crisis, borrowers should not be faced with administrative and financial catastrophe as they begin to regain their footing,” they write.
Warren and Markey argue that not only are borrowers not ready to start repaying their loans, so are service officers – who have never tried to fix more than 43 million accounts at once. reimbursement.
Senators say loan officers told them they were struggling to get in touch with all of their borrowers and needed time to build up their staff to support borrowers through the transition.
These problems, according to lawmakers, could have serious negative effects on borrowers, eventually preventing them from reaching other financial milestones, such as taking advantage of today’s low mortgage rates to buy their first home.
Student loan cancellation still on the table
In his presidential campaign, Biden promised to write off $ 10,000 in student loan debt for every American borrower. Some Democratic lawmakers, including Warren and Senate Majority Leader Chuck Schumer, say it doesn’t go far enough – and they’re arguing for a $ 50,000 pardon.
While Biden’s recent budget proposal doesn’t include any student loan forgiveness, he hasn’t necessarily excluded it. He has already written off about $ 3 billion in student loan debt related to specific circumstances.
About $ 1.6 billion was handed over to borrowers who said they were scammed by their schools. More recently, a debt of $ 55.6 million was written off for former students of three schools who made “widespread and substantial misrepresentation” to students, the education ministry said.
But the $ 50,000 question is still open. Biden’s Education Secretary Miguel Cardona has reportedly studied for months whether forgiving such student debt by borrower was within Biden’s reach.
What to do if you need relief as soon as possible
If you are one of the millions of Americans struggling with mountains of student loan debt, you have a few options to lighten your load while the administration continues to reflect on the issue of general debt forgiveness.
As a first step, you might consider refinance your student loans. Interest rates on student loan refinances from private lenders have reached record highs, so a refi with a new private loan could significantly reduce your monthly payments.
If a federal loan forgiveness occurred, it would not apply to private loans.
If you own your home, you could refinance your mortgage. Some 13.9 million mortgage borrowers could save an average of $ 293 per month with a refi, according to Mortgage Technology and data provider Black Knight.
The best mortgage or student loan refinance rates go to borrowers with the highest credit scores. If you haven’t seen your score in a while, it’s now easy to take a check your credit score for free.
Once you’ve managed your debt, your next step might be to boost your bank account, perhaps investing at a low value in the stock market. A very popular app helps you build a diverse portfolio using little more than your “spare currency” for daily purchases.