Extending the student loan payment pause is unfair for most Americans who didn’t borrow student loans, says this U.S. senator.
Here’s what you need to know — and what it means for your student loans.
Student Loans
Sen. Joni Ernst (R-IA) says that if President Joe Biden extends the student loan payment pause, it would be both “unfair” and “shortsighted.” The student loan payment pause, which has been ongoing since March 2020, is scheduled to end on May 1, 2022. For the past two years, student loan borrowers haven’t been required to make any federal student loan payments and student loan interest rates have been set to 0%. Now, Biden is considering extending the student loan payment pause for a fourth time during his presidency and the sixth time overall. (Biden could pause student loans forever).
“This is a shortsighted & unfair deal for the vast majority of Americans who didn’t take on debt & will ultimately be stuck [with] the bill. Let’s make sure students have a clear picture of these costs before they take out a loan [with] my STUDENT Act instead of forcing others to pay it,” Ernst tweeted.
(Student loan cancellation and the student loan payment pause are confusing. Here’s what to know).
Student loan relief: an alternative to the student loan payment pause
Ernst believes that extending the student loan payment pause — which collectively has saved student loan borrowers $5 billion a month — is not the best public policy. Instead, she and Sen. Chuck Grassley (R-IN) proposed new legislation known as the Student Transparency for Understanding Decisions in Education Net Terms (STUDENT) Act. The STUDENT Act would:
- provide student loan borrowers with an estimate of the total amount of interest they would pay over the life of their student loans;
- provide more transparency to student loans;
- implement a standard 10-year student loan repayment plan; and
- disclose the total interest amount during or prior to borrowing a student loan.
While the STUDENT Act won’t provide student loan relief, the proposed legislation will empower student loan borrowers to make better financial decisions before borrowing a student loan. It’s hard to believe that there isn’t existing law that requires lenders to disclose the total interest owed based on a student loan repayment plan. With more transparency, student loan borrowers could make better decisions about which college or university to attend, how much student loan debt to borrow, and how long it could take to pay off student loans.
(New proposal would extend student loan payment pause and cancel student loans)
“Students and their families should have a clear picture about the true costs associated with their loans so they can fully understand how they’ll impact their future,” Ernst said. “Providing them with the tools to know what the real deal is with their federal student loans is commonsense and will help them make informed decisions.”
Biden should decide on student loan payment pause and student loan cancellation today
Biden should decide on the student loan payment pause and student loan cancellation today. This will give more certainty to student loan borrowers so they can plan for their financial future. Once borrowers know if student loan payments will be due after May 1, 2022, they can start to make financial decisions to prepare for the restart of student loan payments. Similarly, if student loans won’t be cancelled, they can pursue alternative strategies for student loan repayment. There are some indications that Biden could extend the student loan payment pause. (Biden will cancel $6.2 billion of student loans). For example, White House Chief of Staff Ron Klain said Biden is considering options to extend the student loan payment pause and cancel student loans. The U.S. Education Department also instructed student loan servicers to stop notifying student loan borrowers about the restart of student loan payments after May 1. However, there are indications that Biden won’t extend the student loan payment pause or cancel student loans. (Here’s who won’t qualify for $6.2 billion of student loan cancellation). For example, Biden dropped student loan cancellation from his annual budget. Another potential option is Biden cancels student loans but ends student loan relief.
Student loan payments are scheduled to restart after May 1. Most importantly, evaluate all your options for student loan repayment so you’re completely prepared. Only you know your unique financial situation.
Here are some popular ways to pay off student loans faster:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)
