The pandemic relief benefit was set to expire on September 30 after an unprecedented 19-month suspension. The freeze was initially put in place by Congress and then extended by both the Trump and Biden administrations.
“As our nation’s economy continues to recover from a deep hole, this final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment,” said Education Secretary Miguel Cardona in a statement.
Borrower balances have effectively been frozen for more than a year, with no payments required on federal loans since March 2020. During this time, interest has stopped adding up — saving the average borrower about $2,000 over the first year — and collections on defaulted debt have been on hold.
The relief is even more significant for those who work in the public sector and may be eligible for loan forgiveness after 10 years. They are still receiving credit toward those 10 years of required payments as if they had continued to make them during the pandemic, as long as they are still working full time for qualifying employers.
Both the pause on payments and interest waiver is automatic, but only applies to federally held loans. That covers roughly 85% of all federal student loans, including those known as direct federal loans and PLUS loans that parents have taken out on behalf of their children. It excludes some federal loans that are guaranteed by the government but not technically held by it. Generally, those were disbursed prior to 2010.
The move comes after key Democratic lawmakers have put pressure on Biden to extend the relief. Senate Majority Leader Chuck Schumer of New York and Sen. Elizabeth Warren of Massachusetts led a group of more than 60 other Democrats in asking the President in a letter sent in June to push back the restart date, warning it could “create a significant drag on our economic recovery.”
Schumer and Warren have also led the charge in pressuring Biden to go even further, urged him to cancel $50,000 in student debt per borrower.
Biden, who said during the presidential campaign that he would support canceling $10,000 per borrower, has repeatedly resisted the pressure since taking office, arguing that the government shouldn’t forgive debt for people who went to “Harvard and Yale and Penn.”
As of now, he has directed Cardona, his education secretary, to write a memo on the executive branch’s legal authorities to cancel debt. It would be an unprecedented move, but a memo from lawyers at Harvard’s Legal Services Center and its Project on Predatory Student Lending says the Department of Education has the power to do so.
Since taking office, Biden has canceled about $1.5 billion in debt for borrowers who were defrauded by their for-profit colleges. The forgiveness process for those borrowers has been in place for years, but cancellations came to a halt during the Trump administration under then-Education Secretary Betsy DeVos, who attempted to change the rule.