Last week, the Biden government announced a new series of programs is designed to provide relief to millions of student loan borrowers. The plans include an extension of the original set-aside payments and accrued interest is expected to be completed in May. This tolerance for student loans is now being extended until August 31 – a move that has met with mixed reactions and, above all, a call for more permanent action on student loans by the president. But the other, lesser-known act Biden did was automatic repayment in good condition for bad loans.
While these programs only involve federal loans, such as direct loans, 43.4 million borrowers in the US are going to benefit. Up to 8 million defaulting borrowers will be able to start their payments without penalty once the extension expires on August 31, 2022.
What does it mean that bad loans are written off?
When a student loan falls into disrepair, the federal government is able to use a number of tools to secure loan repayment, including payroll, tax filing and reductions in Social Security payments, such as Social Security. Insurance. By repaying the loans in good condition and offering a “new beginning”, the administration hopes to reduce the financial impact of repaying the federal loan when the pause ends this summer.
“If loan repayments continued normally in May, an analysis of recent data by the Federal Reserve shows that millions of student borrowers would face significant financial hardship and delays and bankruptcies could threaten the financial stability of Americans,” he said. Biden in a statement.
Who is eligible for deletion?
Unfortunately, these programs are only available to people with federally or federally backed student loans – Direct loans, any loan held by the Department of Education, and loans through private lenders backed by the federal government. Those who received loans through other institutions do not qualify.
Elimination alone will benefit up to 8 million overdue borrowers and borrowers. At the same time, the additional three-month extension of the arrears is intended to allow borrowers to work with the Ministry of Education to develop a repayment strategy.
“The Department of Education is committed to ensuring that student loan borrowers have a smooth transition back to repayment,” said Secretary of Education Miguel Cardona. in a statement. “This additional extension will allow borrowers to have greater financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic. Supporting students, families and borrowers – especially those disproportionately affected by the pandemic – remains a top priority for the Biden-Harris government. “During the hiatus, we will continue our preparations to give borrowers a fresh start and ensure that all borrowers have access to repayment plans that meet their financial situations and needs.”
But what about canceling a Biden student loan debt?
Although Biden and Harris have campaigned on a student debt relief platform, few steps have been taken toward widespread debt relief since taking office. Earlier this year, Management forgave Debt of $ 415 million to fraudulent borrowers from for-profit colleges and have taken similar targeted measures for other groups of borrowers as those who are unable to work to repay their loans. However, there is still no plan for a wider debt write-off.
At a press conference on April 6White House Spokeswoman Jen Psaki said the president did not “rule out” student debt cancellation, adding, “I would note, again, that he would encourage Congress to send him a $ 10,000 bill to cancel , something he himself spoke about the impatience of signing the campaign “.