Joe Biden will ask the Department of Education on Wednesday to extend the nearly year-long pause on student loan payments by September 30 as one of his first acts as president, delivering on the administration’s campaign pledge to prioritize and begin resolving the nearly $1.6 trillion debt crisis.
As part of the federal government’s COVID-19 response, all federal student loan payments have been suspended since March. In early drafts of the December stimulus package, an extension of the grace period was included but was cut in final negotiations. Before Mr. Biden’s Executive Order, set to be signed on Wednesday afternoon in the Oval Office, payments were scheduled to begin at the end of January.
Since before the pandemic, student loan debt has been a looming financial problem, but the problem has been compounded by extensive coronavirus-related job losses and pay cuts, especially among millennials. According to the Federal Reserve Bank of New York, federal student loan debt hit an all-time peak last year, nearing $1.6 trillion for over 40 million Americans. On average, every month, student loan borrowers owe between $200 and $299, a sum that is literally untenable for many; about one in every five borrowers is in default. According to the U.S. Department of Education.
A Pew study from November found that nearly 6 in 10 borrowers said it would be “somewhat” or “very difficult” to restart payments on their loans the next month.
Mr. Biden told voters that tackling student loan debt would be one of his top priorities as president on the campaign trail. Yet it remains unclear exactly how the new administration wants to tackle the $1.6 trillion debt. Mr. Biden has thrown his support behind Legislative action as recently as last week to cancel $10,000 per borrower in federal student debt, but some of his more radical Democratic colleagues say that’s not enough. Senator Elizabeth Warren of Massachusetts suggested pardoning up to $50,000 in debt during the 2020 presidential primaries, and Senator Bernie Sanders of Vermont called for all student loans to be canceled.
In December, Mr. Biden named the leader of Connecticut schools, Miguel Cardona, as his choice for secretary of education. If confirmed, Dr. Cardona, who spent two decades of his educational career as a public school teacher, will give a direct juxtaposition to the former Education Secretary of the Trump administration, Betsy DeVos, a billionaire school choice advocate.
The Department of Education, under DeVos, warned that when student loan payments resume, the transition would be messy. The department said in its 2020 annual report that it expects loan servicers and that the federal government “face a heavy burden in ‘converting’ millions of borrowers to active repayment.” Some of those borrowers will become delinquent, the report warns.