If Biden extends student loan relief beyond September 30, here are 5 options.
Here’s what you need to know—and what it means for your student loans.
Student Loans
Student loan relief is expected to end on September 30, 2021. However, student loan borrowers and members of Congress alike are asking President Joe Biden to use executive authority to extend student loan relief to a later date. A recent survey found that 90% of student loan borrowers say they’re not ready to start paying student loans on October 1. Others say that there has been 18 months of student loan relief as well as student loan cancellation. What will Biden do regarding student loan relief?
Here are five potential options:
1. Option #1: Biden does not extend student loan relief
The first option is the base case scenario: Biden doesn’t extend student loan relief beyond September 30, 2021. This means that federal student loan payments are due again starting October 1, 2021, and your regular interest rate will resume as well. This is probably the last choice of many student loan borrowers, but absent any announcement on extending student loan relief (which hasn’t happened yet), this appears to be the most likely scenario. Biden would argue that the economy is improving, jobs number are strong, unemployment is low, and vaccine rates are significant. Plus, most student loan borrowers haven’t paid federal student loans since March 2020, providing nearly 18 months temporary student loan forbearance. Opponents of this decision say it could lead to higher student loan default if student loan borrowers aren’t prepared financially due to the Covid-19 pandemic.
2. Option #2: Biden extends student loan relief to October 31, 2021
The second option is that Biden extends student loan relief, but he only extends it for one month. This is a low likelihood option because Biden is more likely to either not extend or extend for a longer period. The advantage of a one-month extension is that student loan borrowers would have extra time to plan for student loan payments. This could be especially helpful since the current student loan relief is expected to expire in less than 90 days, and there has been no announcement regarding student loan payments resuming. The disadvantage is that one month won’t change much. Yes, it’s some extra time to get your financial life in order, but on the margins, it won’t help address the broader issue of the Covid-19 pandemic and other financial pressures.
3. Option #3: Biden extends student loan relief to December 31, 2021
The third option is to extend student loan relief until year end. If Biden extends student loan relief, the end of the year is a logical date and would be a clear marker for student loan borrowers. Under this option, student loan payments could resume starting January 1, 2022. A three-month extension, therefore, would make more sense than a one-month extension. Student loan borrowers also would have more time to transition to making student loan payments again.
4. Option #4: Biden extends student loan relief to March 31, 2022
The fourth option is to extend student loan relief until March 31, 2022. This is a six-month extension favored by multiple members of Congress, including Sen. Elizabeth Warren (D-MA) and Senate Majority Leader Chuck Schumer (D-NY). These members of Congress say that student loan borrowers need more time with no student loan payments so they can recover financially from the Covid-19 pandemic. There is a precedent of extending student loan relief for this long. For example, after President Donald Trump extended student loan relief twice, Biden extended student loan relief for another eight months upon becoming president. If Biden extends student loan relief to this date, it would mark approximately two years of student loan relief with no federal student loan payments and interest rates at 0%. The dilemma for Biden is such a long extension would run contrary to his administration supporting an economic recovery. On the one hand, the financial situation would be so bad that student loan borrowers can’t afford student loan payments. On the other hand, the economy is improving, businesses are reopening, and jobs are being created. Perhaps the two ideas can co-exist, but the messaging may be tricky.
5. Option #5: Biden extends student loan relief until end of Covid-19 pandemic
The fifth option is that Biden extends student loan relief until the end of the Covid-19 pandemic. This is another request from the same members of Congress who proposed the March 31, 2022 extension date. Whle this option may be favored by student loan borrowers, it’s a vague deadline. What is the definition of “end of the Covid-19 pandemic”? Who makes that determination — the president, Congress, the Center for Disease Control (CDC), the World Health Organization? Is is a data-driven decision or merely a subjective pronouncement? The sentiment is clear — postpone until the sky is blue again — but determining when that will be can be tricky for both student loan borrowers and policymakers.
Biden could pursue any of these five options or an alternative. Again, the base case is that student loan relief will end September 30. Therefore, be prepared to start making student loan payments again as early as October 1. This is also an important time to get a student loan game plan. Make sure you understand all your choices for student loan repayment. Here are some smart options:
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If Biden Extends Student Loan Relief Beyond September 30, Here Are 5 Options - Forbes
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