Deadline Looms: Student Loan Repayment Hot Topic with Lawmakers

• Author: Jacob Greene
• Posted: 2024-08-30

According to several news outlets, the Biden Administration and the White House have indicated that it's unlikely President Biden will end the student loan repayment pause on May 1, 2022. As first reported by Politico, the U.S. Department of Education contacted student loan servicing companies at the beginning of March 2022 with instructions to not send out their upcoming payment notices to borrowers.

Why is this action important? By law, student loan servicing companies must contact borrowers six times minimum with alert notices about an upcoming restart of payments before they can actually demand those payments.

Read on to find out everything you need to know about this important action:

Economic Woes

The federal student loan portfolio currently contains at least $1.6 trillion in debt. Economically, it's the wrong time to demand repayment by borrowers because of the many adverse events taking place at home and around the world that make it nearly impossible for borrowers to repay their loans.

Although many people incorrectly argue otherwise, the COVID-19 pandemic caused by the novel SARS-CoV-2 coronavirus and its variants is ongoing and continuing to adversely impact people financially. Since the end of mask mandates and other precautions in many areas throughout the world, COVID case counts have started to go up again. Material shortages that began with a lack of manpower from the start of the pandemic continue to plague manufacturers along with shipping delays and disruptions, which has increased the cost of products and services to historic highs.

Events taking place in eastern Europe have also set into motion a wide range of new financial problems. Much of the world has been dependent on Russian oil. Conversely, Russia purchases a lot of oil from other countries. With sanctions against Russia, the lack of inexpensive access to a steady flow of oil and the promise of future sales to oil refineries have caused fuel costs to increase above $5 and $6 per gallon in many areas. Economists expect these prices to increase to even higher levels because of local price gauging efforts by unscrupulous gasoline sellers.

All of these events have also increased the cost of food to historic levels. Farmers and ranchers, for example, rely upon both budget-friendly parts and equipment to perform the tasks needed to maintain the food supply. They also rely heavily on fuel oil and gasoline. Farmers, ranchers and others are also dependent on direct and indirect international sales because of global trade set up prior to the start of the pandemic. Disruptions to that trade have financially harmed them too much and forced them to increase their prices.

Political Pressures

Politically, it's also the wrong time because of looming November 2022 elections. Voters and others are closely watching the actions of politicians. In the United States, Democrats are increasingly pressuring President Joe Biden to pause the repayments again because the May 1 deadline is simply too close to November.

Many of them could lose in upcoming elections if he hits voters with more financial difficulties. Confusion may also occur during repayment because servicers FedLoan and Navient are about to end their management of tends of thousands of loans, which means that a variety of errors may occur that accidentally result in repayment problems. Lawmakers are also pressuring him because they feel he must keep his campaign promise of wiping clean at least $10,000 of student loan debt for every borrower.

Another major underlying issue is impacting this political decision: Repayments without fixing the current broken system can only lead to future problems for borrowers during current difficult economic times and when borrowers individually experience financial hardship for a variety of life event reasons. Several senators are trying to fix the system through new legislation, but new laws take time to pass and implement.

These politicians want another pause so that a realistic financial assistance solution is in place by 2023. For example, several politicians believe that an automatic repayment amount cap should exist on the debt for every borrower based on income instead of the current system that places a lot of limits on the people who can apply for income-based repayment plans.

Things to Keep in Mind

Although there's no guarantee that President Biden will extend the repayment pause, it's highly likely given local, national and global events. In the meantime, you can still work with your servicer to attempt to reduce your payments or pause them entirely while experiencing financial hardship. Contact your servicer using the number on their website or your most recent student loan statement or reach out to the U.S. Department of Education's Federal Student Aid office at https://studentaid.gov.