The global pandemic has put a strain on many individual’s financial stability across the United States. The freeze on student loan payments was expected to expire at the end of September. However, it has now been announced by the Education Department that those benefits will now continue until January 31st. This extension is now final and is used to alleviate the financial burdens for students and borrowers. This extension was also put into place by the Biden administration as a way to gain more time to craft what the repayment plans will look like once the final extension freeze is lifted.
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What is the reason for the student loan payment pause?
The reason behind the student loan payment pause is to take away some of the stress from students to allow them to focus on the necessities: their health, family, and finances. During this national emergency, the payment pause was enacted to give students an extension to plan their repayment. This is especially true for students who recently graduated from college or university amid the pandemic with a much more limited job force to dive into.
The student loan payment freeze is used to allow students to take this time to pause as the nation’s economy continues to recover. The Education Department estimates that the zero-percent interest on most federal student loans will save borrowers a collective $5 billion each month. However, it has also been determined that this payment freeze on student loans interest has increased the cost of the federal student loan program by about $76 billion.
Is this extension enough for students?
It is believed by Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren, and Rep. Ayanna Pressley that the student loan system remains broken, exacerbating racial wealth gaps and holding back the economy. Schumer has since been leading lobbying efforts to get the Biden administration to cancel up to $50,000 of debt per borrower.
Many department officials are worried that the short time frame of resuming payments to borrowers would lead to a chaotic transition. This may cause concern considering the fact student loan payments will resume for tens of millions of borrowers at once.
If you are a student facing financial troubles, contact our knowledgeable bankruptcy attorney to discuss your options.
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