Student loans are one of the hottest topics now amidst post-pandemic times. The Biden administration wants to restart the payments of federal student loans, which were temporarily paused during the pandemic. It will likely start from the beginning of next year.
They are also thinking of making changes to policies that provide income-based payments to the borrowers to prevent a sudden increase in their monthly payments. The plan is to prevent an increase in delinquencies when the payments restart in February. The announcement is made in August.
Student Loan Payment and Biden’s Policies
The Education Department is looking at a massive federal student loan of $1.6 trillion that was frozen for the last two years. The progressives want the administration to forgive the entire debt rather than resuming it. Over 40 million students have benefited from the pause that the Education Department had put on interest and monthly payment of student loans, which started in March 2020. It also extended the relief in January.
Miguel Cardona, Education Secretary, said he wants to create policies that will smoothly start the repayment of the loans without burdening students. Rich Cordray, Student aid chief, said that they are creating a major public outreach campaign that includes paid advertisements to inform the borrowers of all the options they have.
“In recognition of the historic impact of a nearly two-year pause in student loan payments, borrowers will be allowed additional flexibility in the early stages of the return to repayment,” the department stated in one of their documents. The administration has a smooth transition plan that will allow borrowers to return to repayment without any hassle.
The department has instructed the financers to create a “safety net” for the students in the first three months when their first payment is due in 2022. That means the students who are unable to pay their loan in the first three months wouldn’t be penalized in any way.
The department will create a direct outreach campaign for certain students who were delinquent even before the pandemic started, didn’t finish college, or have started to pay loans recently. They are also creating an income-based repayment program that makes repayment easier based on the proof of their income and family size annually.
This program was suspended when the pandemic broke out. But since the payments are restarting, the 9 million borrowers who were beneficiaries of this income-based repayment program will have to submit their income, or else there will be a surge in their monthly payment.
Millions are requesting the department to give some time to submit their income and family size proof, to which they have decided to go for a self-certification method over the phone. The department is also planning to pull over 7 million defaulters out of their default status. This is not finalized but it is in plans, referred to as “Operation Fresh Start”. However, many Democrats have called for the removal of all the federally held student loans.