The Biden administration is once again extending the moratorium on federal student loan payments, a benefit that began in March 2020 to assist people who were financially strained as a result of the Covid-19 outbreak.
The extension comes at a time when the Biden administration’s student loan forgiveness programme is mired in litigation. Officials had promised borrowers that the debt forgiveness programme, valued up to $20,000 per borrower, would be implemented before loan payments resumed in January.
The payment halt will be in effect for 60 days after the litigation is completed. According to the Department of Education, if the programme has not been implemented and the litigation has not been settled by June 30, payments will continue 60 days later.
“I’m quite convinced that my plan is legal,” President Joe Biden stated in a video broadcast to Twitter on Tuesday, referring to his student loan forgiveness scheme. “However, it isn’t reasonable to expect tens of millions of qualified borrowers to begin student debt payments while the courts evaluate the lawsuit,” he added.
The Department of Justice requested the Supreme Court last week to intervene and reinstate the student debt forgiveness programme until the legal challenges are resolved. On November 10, a lower court judge in Texas ruled against the programme.
The payment pause extension allows the Supreme Court to hear the case during its current term, according to Biden. The administration had stated that the most recent extension, till the end of December, would be the final one.
The notification on Tuesday is the fourth rescheduling of the payment starting date since March 2020.
Borrower balances have been effectively frozen since then, with no payments necessary on the vast majority of federal student loans. During this time, interest has ceased to accrue, and collections on defaulted debt have also ceased.
According to the Committee for a Responsible Federal Budget, the years-long moratorium on payments and interest will cost the government $155 billion through the end of 2022. The new extension will contribute to that total.
Individual borrowers earning less than $125,000 in 2020 or 2021, and married couples or heads of households earning less than $250,000 in those years, might have up to $10,000 of their federal student loan debt cancelled if Biden’s student loan forgiveness scheme is permitted to proceed.
If a qualifying borrower additionally obtained a federal Pell grant while in college, the individual is eligible for debt forgiveness of up to $20,000 per year.