Biden administration extends a student loan payment pause.

By:  Erica L. Green
The New York Times

The Education Department announced Friday that it would continue a moratorium on federal student loan payments through Jan. 31, extending emergency relief for millions of borrowers that had been set to expire next month.

The department said that this would be the “final extension” of the pause, which the Trump administration instituted in March 2020 at the outset of the coronavirus pandemic, and that the additional time would allow the agency to transition borrowers back into repayment and reduce the risk of default and delinquency. More than 40 million borrowers have federally held loans, and during the moratorium, they have been interest-free and not subject to repayment or penalties for nonpayment.

“The payment pause has been a lifeline that allowed millions of Americans to focus on their families, health and finances instead of student loans during the national emergency,” Education Secretary Miguel A. Cardona said in a statement. “As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need” to plan to resume payments.

Several Democratic leaders in Congress had pressed the Biden administration over the summer to continue the student loan pause, saying that the fast-approaching expiration was ill timed considering that millions were still suffering financial hardship from the pandemic.

“Since the beginning of the Covid-19 pandemic, millions of Americans have struggled to keep a roof over their heads, pay bills and put food on the table,” the heads of the Senate and House Education Committees, Senator Patty Murray of Washington and Representative Robert C. Scott of Virginia, wrote in a June letter. “While the economy has begun to show promising signs of recovery, more than nine million Americans remain out of work, and the economic and health disparities created by the pandemic are severe.”

They also wrote that the pause had helped borrowers “cover essential expenses during the pandemic and during ongoing recovery efforts.”

The Federal Reserve Bank of New York estimated that the pause had saved borrowers $7 billion per month in payments during the pandemic, according to the letter from Ms. Murray and Mr. Scott, and the Education Department estimated that borrowers saved about $5 billion per month on loan interest.

Senator Richard M. Burr of North Carolina, who is the top Republican on the Senate Education Committee and co-wrote a June letter opposing an extension, said there was “no rational excuse” for another extension, which he said would cost an estimated $20 billion on top of $76 billion already spent.

“As vaccination rates continue to increase, Americans are returning to work and returning to their normal daily lives,” Mr. Burr said in a statement Friday. “Student loan repayments should resume as well.”

In a statement, President Biden said the current jobs numbers showed that “we have the tools that will allow us to beat Covid-19 and keep our economy recovering at a record rate.” But he added, “We know there is more work to do, and the road will still be long for many people — especially for the one in six adults and one in three young people who have federal student loans.”

Notably, the Education Department emphasized that January was a “definitive end date” — this will be the fourth extension since the pandemic began — as the Biden administration faces mounting pressure from Democrats to erase up to $50,000 in federal student loan debt.

An official familiar with the department’s plans said that the January expiration date was based on financial aid cycles and delinquency patterns, and that the emphasis on its finality was intended to give borrowers more certainty than the rolling extensions have provided. The department is also preparing for the departure of major loan servicers — including the Pennsylvania Higher Education Assistance Agency, known as PHEAA, which handles millions of accounts — and will use the four months to transition.

The announcement drew cheers from advocates for student borrowers.

Persis Yu, the director of National Consumer Law Center’s Student Loan Borrower Assistance Project, said there were “too many moving parts to successfully start federal student loan repayment,” citing the loan servicer shake-up.

“Borrowers are collectively taking a huge sigh of relief at the news that the federal student loan payment pause has been extended once again,” Ms. Yu said in a statement. “The student loan system is not ready to resume repayment on Oct. 1, and President Biden has made the right decision to postpone repayment.”

The extension is likely to amplify calls for the Biden administration to cancel student loan debt outright.

In a joint statement, Senator Chuck Schumer of New York, the majority leader, Senator Elizabeth Warren of Massachusetts and Representative Ayanna Pressley of Massachusetts — all Democrats who have urged Mr. Biden to cancel student loan debt by executive order — said the pause “provided an enormous relief to millions of borrowers facing a disastrous financial cliff” but did not go far enough.

“Our broken student loan system continues to exacerbate racial wealth gaps and hold back our entire economy,” the statement said. “Student debt cancellation is one of the most significant actions that President Biden can take right now to build a more just economy and address racial inequity. We look forward to hearing the administration’s next steps to address the student debt crisis.”