Student loan interest set to pick up when payments resume, but some Senate Democrats ask President Biden to waive it
As millions of federal student loan borrowers are set to start paying off student loans in about two months, a group of Democratic senators are calling on President Joe Biden to waive interest, which has been set at zero percent in most. The move could save borrowers millions of dollars per month, even if repayments resume.
The Biden administration announced in August that an extension of the student loan repayment hiatus – giving a break to some 42 million borrowers – would continue until January 31, 2022 as people continued to fight the pandemic . Student loan repayments have been on hold since March 2020, when COVID-19 plunged the United States into economic crisis. Interest is also expected to accrue on loan resumption. But the group of 14 lawmakers want the interests to be abandoned until the end of the health emergency linked to the coronavirus pandemic.
“Accumulating interest on student loans can be a daunting challenge for borrowers with the lowest incomes or the heaviest student debt loads,” Senators said in the report. letter Monday to Mr. Biden. The group noted that the debt has also disproportionately affected black, Latino and indigenous communities.
“Continuing to forgo interest on student loans will provide borrowers with vital financial support at a time when students, borrowers and higher education institutions are still recovering from the economic and academic disruptions caused by the pandemic, including the rise in costs, ”the senators, led by Senator Raphael Warnock of Georgia, said in the letter.
According to the Department of Education, waiving interest on student loans saves borrowers about $ 5 billion per month. This represents more than $ 100 billion since the start of the pandemic. Lawmakers argue that the extra money saved by borrowers can be spent on other necessities such as food and shelter.
At the same time, senators are calling on the Biden administration to give borrowers who have already defaulted on their federal student loans a “fresh start” by automatically rehabilitating their loans.
When the payment break ends, defaulting borrowers might begin to see stages resume, such as negative reports to credit bureaus, collection agency calls, and the garnishment of certain salaries and benefits. Lawmakers have said that by rehabilitating these loans, “the Administration can change the lives of millions of borrowers with the stroke of a pen.”
Last week, a group of Democratic senators alsoto some of the largest student loan managers to ask for more information on some of the steps they are taking to communicate with borrowers and prepare them for resumption of repayments.
The Biden administration has said extending the suspension of payments until January of next year will be the “final.” The White House has not announced any updates since then. In their letter, lawmakers called on the president to act on their request to waive interest payments “as soon as possible.”