Biden May Extend Student Loan Relief Beyond September 30, But There’s One Major Dilemma

Categories: Student Loans

By Zack Friedman, Forbes

Biden may extend student loan relief beyond September 30, but there’s one major dilemma.

Here’s what you need to know.

There are two parallel paths for your student loans happening right now. The first — student loan cancellation — is about the possibility of wide-scale student loan cancellation happening for at least some student loan borrowers. However, the hope of wide-scale student loan cancellation doesn’t seem to be near-term. With a focus on the infrastructure plan and no news from the Biden administration on potential timing, student loan cancellation appears to be in limbo. The second — and more immediate option — is the possibility of extending student loan relief beyond September 30, 2021 when the following is set to expire:

  • No federal student loan payments;
  • Interest rates on federal student loans set to 0%; and
  • No collection on federal student loans in default.

Absent any extension of this student loan relief, federal student loan payments will be due starting October 1, 2021.

Will Biden extend this student loan relief?
The argument to extend student loan relief is clear and goes something like this: student loan borrowers are still struggling financially from the Covid-19 pandemic and it’s too soon for them to pay student loans. There are other reasons to delay student loan payments too, but this is a core reason. According to a new survey, 90% of student loan borrowers are not ready to pay student loans again starting October 1. That said, the word “ready” could refer to “financially ready” or “psychologically ready,” or both.

Opponents of extending student loan relief say student loan borrowers will have had 18 months of no federal student loan payments. They argue that this has amounted to $5 billion per month of student loan cancellation — per the U.S. Department of Education. In total, student loan borrowers will get more than $90 billion of student loan cancellation during the Covid-19 pandemic. This student loan forgiveness is in addition to the $3 billion that Biden has cancelled since becoming president. Opponents say there’s a direct cost to extending student loan relief, even if the Covid-19 pandemic has been traumatic on multiple fronts, economic and otherwise.

Student loan relief: Biden’s dilemma
Despite arguments on both sides, there’s an even bigger dilemma that Biden faces with respect to extending student loan relief beyond September 30. Biden is well aware of the arguments on both side of extending relief. On the one hand, extending student loan relief would help student loan borrowers facing the weight of crushing student loan debt coming out of an unprecedented pandemic. On the other, there’s a cost to student loan relief — and as noted by the Education Department — it’s been more than $5 billion per month during the Covid-19 pandemic. The bigger issue for the president — however — is what extending student loan forgiveness symbolizes. Biden is leading an economic recovery. It’s tough politically to say that the economy is recovering, employment numbers are strong, and jobs are being created. Then, at the same time, say that the economy is struggling so much that student loan borrowers shouldn’t have to pay student loans after getting 18 months of student loan relief. The messages are conflicting.

That said, not every decision in Washington is based on political calculus, and supporters of extending student loan relief will say to put people ahead of politics. However, it will be tough for the president to argue that the economy is rebounding, but at the same time also say it’s not for student loan borrowers. This doesn’t mean that Biden won’t extend student loan relief beyond September 30 because that’s a possibility, but it’s something that must be weighing on the Biden administration as it considers next steps on student loans.

Even if student loan relief is extended, remember that it’s only temporary. You will still owe your student loan balance once payments resume, and your interest rate will be instated. That’s why it’s critical to get in front of your student loans now. Get a student loan game plan. Here are some smart options:

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