WASHINGTON — Student loan borrowers will know "soon" about an extension of the pause on student loan payments and possible debt cancellation, the U.S. education secretary said in an interview Tuesday, but still no decisions have been made.
The pause expires Aug. 31. With the deadline just over two weeks away, borrowers and student loan servicers are growing weary without any guidance.
"We're having conversations daily with the White House and borrowers will know directly and soon from us when a decision is made," U.S. Education Secretary Miguel Cardona told CBS News.
The White House has said Biden will make a decision by the end of August.
While it’s unclear if Biden will issue any sort of widespread debt cancellation, it is unlikely the president would resume required payments so close to the midterm elections and with so little advance notice to borrowers. In late July, the Department of Education told student loan servicers not to contact borrowers about resuming payments, the Wall Street Journal and NBC News reported, signaling an extension of the pause is likely.
The CEOs of at least two financial companies are preparing for the moratorium to last until at least January 2023. In second quarter earnings calls, the heads of Navient and SoFi both said they expect Biden to extend the pause and were factoring that into business forecasts, though it's important to note neither company services federal student loans for the Department of Education.
"It's hard for us to believe that it does not get extended," Navient CEO Jack Remondi told an analyst.
This is the closest the moratorium deadline has been during Biden's presidency without an update — not including when Biden extended the pause on his first day in office, which he had pledged to do during the campaign and leading up to his inauguration.
Student loan moratorium timeline
March 20, 2020: President Trump first pauses interest and payments on federal student loans
March 27, 2020: CARES Act extends pause through Sept. 30, 2020
Aug. 8, 2020: Extended through Dec. 31, 2020
Dec. 4, 2020: Extended through Jan. 31, 2021
Jan. 20, 2021: Extended through at least Sept. 30, 2021
Aug. 6, 2021: Extended until Jan. 31, 2022
Dec. 22, 2021: Extended through May 1, 2022
April 6, 2022: Extended through Aug. 31, 2022
The White House has said the issues of extending the payments pause and debt cancellation are being considered separately.
On the campaign trail, Biden supported forgiving $10,000 per borrower. But internal negotiations have stretched on for months, while some Democrats call on the president to do more and Republicans staunchly oppose any mass debt cancellation efforts.
So far, the Biden administration has taken a more targeted approach to debt cancellation, focusing largely on students who attended for-profit colleges. After announcing another $4 billion this week for students of the now-defunct ITT Technical Institute, the administration says it has now approved nearly $32 billion in student debt for 1.6 million borrowers.
When could it go into effect?
According to Politico, the Department of Education has prepared plans for possible widespread debt cancellation, the scale of which would be unprecedented in the history of the federal student loan program.
If Biden gives it the green light, the education department is prepared to cancel debt within a matter of weeks for many borrowers who have income information on file with the agency, documents obtained by Politico show, such as borrowers who have already certified their income for income-driven repayment plans. While that applies to several million borrowers, most other borrowers would self-report their income to attest their eligibility through the federal student aid website, Politico reports.
The plans indicate the Department of Education is preparing for all types of student loans to be eligible for forgiveness, including Grad and Parent PLUS loans, according to Politico.
Who would qualify?
The White House is considering an income cap for loan forgiveness, according to the Washington Post. While nothing has been finalized, the Washington Post reported the cap being considered would be $125,000 or $150,000 for individual filers, and $250,000 or $300,000 for married couples filing jointly.
According to CNBC, more than three-quarters of borrowers would still likely qualify for forgiveness under those rules.
Borrowers with private student loans will be unlikely to see relief. Because their debt is held by private companies, those loans are not subject to the payment pause or federal debt forgiveness.