Relief on the Way? Student Loan Servicers Told Not to Contact Borrowers

Relief on the Way? Student Loan Servicers Told Not to Contact Borrowers

A White House official said Monday night that “no decision has been made” about whether to extend the pause again.

 

For more than two years, millions of Americans have taken advantage of the ongoing moratorium on federal student loan payments. Though if the current pause isn’t extended for the seventh time, it appears that borrowers will be required to start payments again beginning in September.

But, according to the Wall Street Journal, President Joe Biden’s Education Department already has been telling student loan servicers not to contact borrowers about resuming payments, potentially signaling that another moratorium will be announced soon.

 

However, NBC News reported that a White House official said Monday night that “no decision has been made” about whether to extend the pause again. The official added that the president will make a decision before August 31.

Meanwhile, Scott Buchanan, the executive director of the Student Loan Servicing Alliance, which represents all of the companies that service the federal loans subject to the Biden administration’s moratorium, told the news outlet that his group has previously warned the government about potential problems that may arise from resuming payments.

“We needed to know two months ago, but really, we’re at the Rubicon here. If we get into August and don’t have guidance on this, I mean, we are really creating an untenable position for us and for borrowers,” he said.

“We can’t turn on a dime. And I think that’s something they don’t really fully appreciate,” he continued.

Since taking office, Biden has so far canceled nearly $26 billion of student loan debt for more than 1.3 million borrowers. Just last month, the administration announced that it would wipe clean the federal student loan debts of about 200,000 borrowers, totaling $6 billion, who claimed in a class action lawsuit that they were defrauded and misled by their schools.

Despite these actions, the nation’s student loan debt is still sitting at roughly $1.75 trillion, according to data compiled by the Federal Reserve Bank of St. Louis.

For months, Washington lawmakers like Senate Majority Leader Chuck Schumer (D-NY), Sen. Elizabeth Warren (D-MA), and Sen. Raphael Warnock (D-GA) have aggressively pressed Biden to sign off on forgiving $50,000 of student loan debt per borrower. The president, however, has stood firm in his stance that he won’t go higher than his campaign promise of $10,000 per borrower.

“I am considering dealing with some debt reduction,” Biden told reporters at the White House in May.

“I am not considering $50,000 debt reduction. I am in the process of taking a hard look at whether or not there will be additional debt forgiveness and I will have an answer on that in the next couple of weeks,” he added.

Ethen Kim Lieser is a Washington state-based Finance and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.