The US Department of Education has announced that it will extend the moratorium on federal student loan payments until January 31, 2022. The move, which does not affect private student loans, has been welcomed by many, but has also received a fair share of criticism.
The Biden administration has stuck to its intention to be more lenient when it comes to student loan relief. We wrote in June that the Biden administration had already written off over $ 2 billion in federal student debt, which may seem like a big deal (and in a way, it is) – but it doesn’t. is little more than a drop in the ocean when you consider that Student loans in the United States reached a whopping $ 1.6 trillion in 2019, the equivalent of 7.5% of the country’s GDP. country. Some 45 million Americans are still currently paying off student debt. But Biden hasn’t been idle since June. By January 31, 2022, student loan borrowers will have received over $ 110 billion in student loan cancellations – Federal student loan borrowers getting $ 5 billion in savings per month in debt relief.
The amount is still lower than what Senator Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY) were asking for, but in addition to the loan cancellation itself, there is also 22 months with no new interest or federal student loan payment. So they’re not exactly peanuts.
But that’s the last straw, the White House said. No matter what happens in the future of the pandemic or the economy, this federal student loan relief has an end date: January 31, 2022. After that, students, you will pay or refinance student loans and it’s done.
The reactions have been mixed. While Warren or Schumer think it is not enough, those who are more conservative argue that it is too much. The Wall Street Journal editorial board called him “executive prideclaiming that students do not need cancellation and that nearly 90% of the 43 million student borrowers in March 2021 were not making any payments.
The WSJ also added that on average this saves students $ 400 per month, hinting that more cancellations are coming and that many students will be using the money to “buy GameStop shares.” But White House officials argue that for millions of people in need, it is a vital lifeline.
âThe payment break has been a lifeline that has allowed millions of Americans to focus on their families, health and finances instead of student loans during the national emergency,â the secretary said. ‘Education, Miguel A. Cardona, in a statement. “As our country’s economy continues to recover from a deep hole, this latest extension will give students and borrowers the time they need.” [to resume payments].
Whether or not the cancellation will have a positive effect on the U.S. economy and its people remains to be seen, but for now, student loans (federal and private) are expected to remain a significant part of the U.S. economy.