Borrowers have four more months until federal student loan debt payments resume. Democratic lawmakers in Pennsylvania are among those nationally calling for the president to do more.
President Joe Biden has again extended the federal student loan freeze that was set to end after this month.
The Biden administration announced Wednesday that federal student loan payments will remain paused through Aug. 31, extending a freeze that began under the Trump Administration when the pandemic started in March 2020.
Biden said he is extending the student loan payment moratorium to help borrowers “continue to get back on their feet after two of the hardest years this nation has ever faced.”
Pennsylvania’s Democratic lawmakers applauded the extension while urging the President to do more.
Top-ranking Democrats like Sen. Chuck Schumer (New York) and Sen. Elizabeth Warren (Massachusetts) have also pressed Biden to cancel up to $50,000 in debt permanently through executive order, saying it would further boost the economy and address racial inequities in student debt. White House press secretary Jen Psaki said Biden “has not ruled out” the possibility.
Biden has yet to follow through on a campaign promise to cancel a minimum of $10,000 of student debt per person.
What the Extension Means
The extension grants borrowers another four months to get their finances in order until payments are due to resume. Interest rates on loans will remain at 0% and collections on defaulted loans (loans where payments are at least 270 days late) will be paused during that time.
Under Biden’s latest action, people who were behind on payments before the pandemic will automatically be put in good standing. That’s a shift from previous policy, which required borrowers in default to make nine consecutive loan payments and apply to exit default.
The moratorium applies to most federal student loan programs. It does not apply to private loans issued by banks or schools.
How Many People Are Impacted?
According to the latest data from the Education Department, more than 43 million Americans owe a combined $1.6 trillion in student debt held by the federal government including more than 7 million borrowers who have defaulted on student loans.
Approximately 64% of Pennsylvania’s Class of 2020 graduates carry student loan debt, according to a report from the Institute for College Access and Success. The average amount of that debt is $39,375. That total ranks third highest in the US, trailing only New Hampshire and Delaware.
A Disproportionate Debt Gap
A Brookings Institution study found that four years after graduating college with a bachelor’s degree, Black graduates carried an average of nearly $53,000 in student debt, while the average debt for white borrowers was $28,000. That debt gap represents an average of more than three times the previously documented amount ($7,400).
Information from the Associated Press was used in this report.