Biden administration extends student loan payment pause into 2023
The federal student loan payment pause has been extended again.
President Joe Biden will extend the federal student loan payment pause through 60 days after June 30, 2023, or after the administration is permitted to follow through on its student debt forgiveness plan, the president announced in a video posted to his official Twitter page.
"The extension will alleviate uncertainty for borrowers as the Biden-Harris Administration asks the Supreme Court to review the lower-court orders that are preventing the Department from providing debt relief for tens of millions of Americans," the White House wrote in a statement.
The news comes as Biden’s student loan forgiveness plan faces multiple lawsuits.
"Callous efforts to block student debt relief in the courts have caused tremendous financial uncertainty for millions of borrowers who cannot set their family budgets or even plan for the holidays without a clear picture of their student debt obligations, and it’s just plain wrong," Secretary of Education Miguel Cardona said in the statement.
The latest extension on the student loan payment freeze is a part of a provision in the CARES Act enacted in 2020. It paused payments due on eligible student loans held by the Department of Education and lowered interest rates to 0%. Prior to today’s announcement, the freeze was set to expire on December 31, 2022. The Trump-era payment pause has since been extended multiple times.
Most recently, activist groups called on Biden to consider extending the payment pause as the courts validate the legality of his proposal, which could erase student loan debt for millions.
Biden’s student loan relief plan calls for the forgiveness of up to $10,000 in federal student loans or up to $20,000 for Pell Grant recipients. To be eligible, borrowers can’t make more than $125,000 per year if filing single or $250,000 for married couples.
If you have private student loans, these won't qualify for any federal loan forgiveness. But you can consider refinancing your loan to a lower rate to help you save on your monthly payments. Visit Credible to speak to a student loan refinancing professional to see if this option is right for you.
BIDEN’S STUDENT LOAN FORGIVENESS: A TIMELINE OF LEGAL CHALLENGES FACING THE PLAN
When does student loan repayment begin?
Student loan payments will resume 60 days after the Department of Education is permitted to implement its student loan forgiveness plan or the litigation is resolved, the White House said in its statement.
"If the program has not been implemented and the litigation has not been resolved by June 30, 2023 – payments will resume 60 days after that," the White House added.
The Department of Education was recently forced to stop accepting new applications for student loan relief.
"Courts have issued orders blocking our student debt relief program," a statement on StudentAid.gov reads. "As a result, at this time, we are not accepting applications. We are seeking to overturn those orders. If you've already applied, we'll hold your application."
But neither the student loan payment freeze or potential widespread forgiveness would apply to private student loans. If you have private student loans, you can refinance these loans to lower your interest rate and monthly payments. Visit Credible to compare different student loan lenders, without affecting your credit score.
STUDENT LOAN REFUND CHECKS ON THEIR WAY TO MILLIONS: HERE'S WHAT TO DO IF YOU DON'T BENEFIT
Student loan forgiveness is still blocked
The Biden administration extended the federal student loan payment pause through the middle of next year because its student loan forgiveness plan is still blocked.
Earlier this month, the 8th U.S. Circuit Court of Appeals, based in St. Louis, issued an injunction blocking the Department of Education from erasing student loan debt based on Biden's executive order in August.
The block stems from a lawsuit brought by Nebraska, Missouri, Arkansas, Iowa, Kansas and South Carolina. The plaintiffs argue the plan would threaten their future tax revenues. A federal judge had dismissed their arguments, but the states appealed the ruling.
In a separate case, a federal judge in Texas had ruled Biden’s loan forgiveness plan "unlawful," and also blocked the student loan forgiveness plan. That suit was led by two borrowers who were either partially or fully ineligible for debt forgiveness.
If you hold private student loans, you can consider refinancing your private student loans to lower your interest rate and monthly payments. Visit Credible to compare different student loan lenders, without affecting your credit score.
STUDENT LOAN DEFAULTS COULD RISE TO HISTORIC HIGH WITHOUT DEBT RELIEF: EDUCATION DEPARTMENT
Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at moneyexpert@credible.com and your question might be answered by Credible in our Money Expert column.