Biden Will Extend Student Loan Payment Pause For 4 Months - Forbes

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President Joe Biden plans to extend the student loan payment pause for four months.

Here’s what you need to know — and what it means for your student loans.

Student Loans

Huge news for student loan borrowers: the student loan payment pause could now be extended until August 31, 2022. According to Politico, Biden could soon announce his fourth extension of student loan relief for more than 40 million student loan borrowers. (Student loan relief: Biden will decide this month whether to extend the student loan payment pause). The extension, which would be the sixth extension overall, means the following for student loan borrowers:

no mandatory federal student loan payments;
0% interest rates on federal student loans with no interest accrual; and
no collection of student loans in default.

The White House hasn’t made an official announcement yet, but one could be expected any day. Currently, the student loan payment pause is scheduled to expire on May 1, 2022. Federal student loan payments have been paused continuously since March 2020, when Congress passed the Cares Act, which provided historic student loan relief. President Donald Trump extended the student loan payment pause twice during his presidency as well.

(Student loan cancellation and the student loan payment pause are confusing. Here’s what to know)

Student loan payment pause: a big win for student loan borrowers

The people have spoken, and the president has answered. For months, progressive Democrats in Congress and student loan relief advocates have been pressuring the president to extend the student loan payment pause. Sen. Elizabeth Warren (D-MA), for example, has argued that if Biden didn’t grant more student loan relief, millions of student loan borrowers would face student loan default and other financial calamity. (Student loan payment pause: Senator says extending student loan relief is unfair to most Americans). Others in Congress have said that the ongoing Covid-19 pandemic and continued financial uncertainty could provide additional financial strain on student loan borrowers and their families.

(Student loan cancellation doesn’t mean what you think it means)

At the same time, some legislators may be frustrated with a fourth month extension. While they may cheer additional student loan relief, many progressive Democrats have urged the president to extend student loan relief for a longer period. For example, Sen. Patty Murray (D-WA) called on Biden to extend the student loan payment pause until 2023. Others in Congress, including Warren, said the student loan payments should be paused until the Covid-19 emergency ends.

Student loan borrowers will save $20 billion

If Biden announces the four-month extension, student loan borrowers collectively will save $20 billion in student loan payments. (New proposal would extend student loan payment pause and cancel student loans). Why? The U.S. Department of Education estimates that every month of this student loan relief saves student loan borrowers $5 billion in interest payments. Therefore, a fourth-month extension equates to $20 billion in savings. Since March 2020, student loan borrowers have saved $195 billion as a result of this student loan relief. Federal student loan borrowers who are pursuing income-driven repayment or public service loan forgiveness also will be able to count non-payments during the student loan payment pause toward requirements for student loan forgiveness.

(Bombshell Report Claims This Student Loan Servicer Misled Student Loan Borrowers)

Will Biden extend the student loan payment pause again?

Progressive Democrats such as Rep. Alexandria Ocasio-Cortez (D-NY) and Rep. Ilhan Omar (D-MN) have criticized the president for not acting sooner to extend the student loan payment pause. They have warned that any failure to extend the student loan payment pause could result in Democrats losing the midterm election in November 8, 2022. (If student loans don’t get cancelled, student loan borrowers threaten to vote against Democrats). Why? They argue that young, Democratic voters feel disengaged and ignored, which could result in low voter turnout — or a vote for Republicans. This potential fourth-month extension ends August 31, which is approximately three months before the midterm election. For political gain, it’s possible that Biden could extend the student loan payment pause for a fifth time through November 2022. (Biden could extend the student loan payment pause forever).

Even with a potential extension of the student loan payment pause, this student loan relief is only temporary. Therefore, invest in a long-term strategy for student loan repayment based on your financial goals and unique financial situation.

Here are smart ways to pay off student loans and become debt-free: