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4 Signs Biden Will Extend The Student Loan Payment Pause Again

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4 Signs Biden Will Extend The Student Loan Payment Pause Again

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Student loan borrowers: Get ready for another payment pause extension.

With the moratorium on federal student loans set to end on Aug. 31, experts say it’s highly likely that it’ll be extended for a seventh time. Student loan payments for federal student loans have been paused continuously since March 2020, granting borrowers temporary relief from mounting student loan balances. 

“The payment pause will likely be extended again, probably until Jan. 31, 2023,” says Robert Farrington, CEO of The College Investor. “The lack of borrower communication to date makes this highly likely.”

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The Biden administration has largely remained quiet since it last extended the student loan payment pause in April, when it cited the ongoing recovery from the COVID-19 pandemic amid rising inflation. When President Joe Biden was asked recently by a reporter where he stands on “the student loan decision,” he said “by the end of August.” However, it’s unclear if he was referring to the student loan payment pause, student loan forgiveness, or both. 

Biden is reportedly nearing a final decision on mass student loan forgiveness, with multiple news outlets reporting he could make an announcement by the end of August on whether he will fulfill a campaign promise to cancel at least $10,000 in student debt per borrower. Rumors and speculation continue to swirl, so we asked student loan experts over the last few months what they think will happen. Most of them agree that broad-based student loan forgiveness is likely not coming. 

While no final decisions have been made, several signs do point to another extension of the payment pause. 

4 Signs the Student Loan Payment Pause Will Be Extended Again

1. Midterm Elections Are Coming

With November midterm elections right around the corner, the president may be hesitant to address the divisive student loan situation. Biden supported canceling at least $10,000 of federal student loan debt during his 2020 presidential campaign, but Democrats and Republicans have remained divided on whether student loans should be forgiven on a large scale. 

Some proponents have called on Biden to cancel upwards of $50,000 in student loans per borrower, whereas opponents have shut down the idea of broad student loan forgiveness entirely. Soaring inflation has become another complicating factor, with broad student loan forgiveness having the potential to increase the buying power for a significant number of Americans in a time when policy makers are looking to tamp down consumer demand.

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Restarting student loan payments two months before an election would be “political suicide,” according to higher education expert Mark Kantrowitz. “Other than the political considerations, there is no valid justification for a further extension to the payment pause and interest waiver,” he says. 

2. The Economy Could Be in Trouble

Administration officials have repeatedly said that they would consider economic factors when deciding whether to issue another extension of the student loan payment pause.

The U.S. economy is currently under pressure, with inflation still at a four-decade high and new signs the country could be in for a recession. Interest rates are rising and regardless of whether we’re technically in a recession or not, many Americans hold the view that the economy is in trouble. This could play into the administration’s decision on whether to extend the pause or not in the near term, experts say. 

“Excessive inflation has increased prices for almost everything and most borrowers are likely not in a position to pay off their loans,” says Tony Aguilar, founder and CEO of Chipper, a student loan repayment app. “An additional extension also provides the White House with more time to review potential forgiveness plans.”

3. Student Loan Servicers Were Told to Hold Off 

The Education Department reportedly told student loan servicers this week to not send out billing notices to borrowers — a sign it does not plan to ask borrowers to resume payments in the near future.

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Because the student loan payment freeze was enacted under the CARES Act, loan servicers are required to give upward of six notices starting at least two months before payments are set to resume. The start of July was the two-month mark for the Aug. 31 deadline, but borrowers have yet to receive any information about the restart of repayment. 

“This suggests that the student loan payment pause and interest waiver will be extended, as there just won’t be enough time to prep borrowers to resume making student loan payments,” Kantrowitz says.

4. U.S. Secretary of Education Hinted at It

During a Senate subcommittee hearing in June, U.S. Secretary of Education Miguel Cardona said the student loan payment pause could be extended again. Cardano said borrowers will get “ample notice” on whatever decision the department makes, though he hasn’t addressed it publicly since. 

When Will Student Loan Payments Likely Resume, and What Should Borrowers Do?

As of today, student loan payments will resume starting on Sept. 1. That leaves millions of borrowers waiting for word about whether they will have to begin repaying their student loans after a nearly two-and-a-half year break.

Because experts generally agree that the pause will be extended, it’s more a question of how long the pause will be extended for. Farrington says a 60-day extension would put it right before the midterm elections, which “seems politically too short.” He says setting the deadline at the end of the year “could be a possibility, but it might not be a good one given all the holidays.” 

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“I believe we will likely see an extension until Jan. 31, 2023,” says Farrington. “As to whether this will be the last one, it’s uncertain. I do think the administration is trying to extend the pause as long as possible so they can sort out any potential forgiveness plans or other student loan reforms.”

Farrington adds that the president can continue to extend the pause as long as there is a state of emergency. “As long as that continues to be extended, so can the payment pause,” he says.

While signs are pointing to another extension, nothing is set in stone yet. Anything can happen, so borrowers should use this time to get prepared and set themselves up for success with a plan. Experts say it’s best to assume that payments resume at the end of August unless we hear otherwise. Update your contact information, review all your loans, start making a budget that accounts for monthly student loan payments in the coming weeks. 

“Right now is the time to assess your debt and find what forgiveness programs you are eligible for; and if you aren’t eligible for forgiveness, you should identify what is the best and cheapest way to pay back your student loans,” Aguilar says.

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