‘Great Uncertainty’ Regarding Student-Loan Repayment May 1: Ed. Dept.

‘Great Uncertainty’ Regarding Student-Loan Repayment May 1: Ed. Dept.
  • Biden proposed more funding in his 2023 budget for Federal Student Aid to help student-loan borrowers.
  • His administration also noted the “great uncertainty” that comes with resuming student-loan payments on May 1.
  • Amid pressure, Biden has not yet commented on a further extension of the pause or on broad debt relief.

Student-loan borrowers aren’t the only ones unsure of what the resumption of payments on May 1 will look like.

This week, President Joe Biden released his $5 trillion budget proposal for the upcoming fiscal year. Included in the proposal was $2.7 billion in funding for the Federal Student Aid (FSA) office to “provide better support to student-loan borrowers,” like improving customer service and reforming loan forgiveness programs.

While the Education Department’s overview reiterated the pandemic measures it’s taken to give borrowers relief, it also expressed uncertainty with what might happen once those measures, like the pause on student-loan payments, expire.

Also in the proposal was an $88.3 billion investment to enact policies like doubling the maximum Pell Grant award and increasing funding for Historically Black College and Universities.

The overview said that while pandemic student-loan relief has protected student-loan performance “from economic disruption caused by the COVID-19 pandemic,” it added that “there is great uncertainty regarding student loan performance and corresponding cost estimates once these measures expire.”

This isn’t the first time Biden’s administration has cautioned of the challenges that could arise should payments resume in a month. In February, the Education Department told the Government Accountability Office that it will be “a challenge to motivate” student-loan borrowers to pay off their debt after an over two-year pause. And back in September, when payments were set to resume in February, FSA head Richard Cordray said the multiple extensions of the pause sowed “tremendous confusion about what even the immediate future may hold.”

“The old saying is that ‘the wish is father of the thought,’ and we can expect that many, many borrowers will not be eager to return to repayment when they have been led to believe, or even to hope, that was never going to happen,” Cordray said at the time. “Getting over that psychological hurdle with millions of Americans may be a much harder job than we know.”

Following Cordray’s comments, Biden did extend the pause for an additional 90 days, through May 1, but that restart date is just a month a way and advocates and lawmakers are growing increasingly worried borrowers will get cut off from relief before they’re financially prepared. On Thursday, nearly 100 Democratic lawmakers called on Biden to extend the pause on payments and cancel “a meaningful amount” of student debt, adding that the president needs to “make clear to the American public” his intentions to provide relief immediately.

While Republican lawmakers have pushed back on further relief, citing its cost to taxpayers and the economy, the New York

Federal Reserve

recently found the student-loan payment pause saved 37 million borrowers $195 billion — and that’s money a lot of them are not prepared to part with.