The Biden administration is expected to extend the federal student loan payment pause through Aug. 31, 2022, according to reporting from Politico. The news comes from sources close to the administration, including a federal official, who say that details are still being finalized but that an official confirmation from the US Department of Education will be made as soon as Wednesday.
This extension would give federal borrowers an additional four months of no required payments and no interest charges, and it would mark the sixth time the forbearance period has been extended since it was established in March 2020.
Many have speculated that an extension is coming
Though the student loan forbearance period is currently set to end on May 1, signs have pointed to another extension. Most recently, White House Chief of Staff Ron Klain spoke on “Pod Save America” about the state of student debt and suggested that an extension was likely. “The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause,” he said.
What’s more, CNBC reported that the instructed administered federal student loan servicers to hold off on communicating to borrowers about payments resuming — even as the forbearance expiry date inch closer.
Midterm elections put pressure on Democratic party
Prominent Democratic lawmakers have been urging President Biden to enact student loan forgiveness since he took office, and upcoming midterm elections have added urgency to those requests.
Just days ago, a group of almost 100 Democratic members of Congress sent a letter to the President urging him to “provide meaningful student loan cancellation” and extend the forbearance period until “at least the end of the year.”
The letter also referred to Klain’s statement on “Pod Save America,” noting that the comments about “potentially extending the payment pause and administratively canceling student loan debt” were encouraging to federal student loan borrowers.
Borrowers would have more time to bolster finances during the pause
The US Department of Education is expected to make an official announcement regarding the extension later this week. If the extension is confirmed, federal student loan borrowers may continue to take advantage of the payment pause through Aug. 31, using any skipped payments for other financial priorities.
An extension is likely to be well received by borrowers; According to a new Bankrate survey, nearly 3 in 4 borrowers who are eligible for the federal forbearance said that an extension would have a positive impact on their personal financial situation. Without needing to make federal loan payments, borrowers may instead be able to pay off private loans, reduce credit card debt, or build emergency savings.
However, borrowers may also choose to pay down their federal student loans as scheduled, free of interest charges.