Why your student loan payments may be delayed (again)

Cory Turner | March 14, 2022
Fernando Cobelo for NPR

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Federal student loan payments are supposed to resume in May, more than two years after they were paused because of the coronavirus pandemic. But the Education Department recently emailed unusual guidance to the companies that manage its $1.6 trillion student loan portfolio, throwing that timing into doubt.

Don’t reach out to borrowers about that May 1 deadline, the guidance said.

The email, obtained by NPR and first reported by Politico, did not explain why servicers should go quiet about the deadline, nor did it say the deadline would change. But the order suggests that the Biden administration is considering another extension of the student loan payment freeze.

The department has a legal obligation to reach out to borrowers at least six times before the return to repayment, so telling servicers not to do this outreach, at a moment when legally it should be happening, means the administration can delay this decision only for so long.

That email comes just a few days after White House Chief of Staff Ron Klain hinted that the repayment pause could be extended, in an appearance on the podcast Pod Save America.

“The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause,” Klain said.

There’s pressure from the left to cancel student debt

Klain’s words — “what we should do on student debt” — are a clear reference to the elephant in the room for Biden: He pledged, as a presidential candidate, to cancel at least $10,000 in student debt per borrower, but his reluctance, so far, to do so has frustrated many in his party.

Biden now faces increasing pressure from his own left flank, with Rep. Ayanna Pressley, D-Mass., recently tweeting, “Student debt cancellation is a racial & economic justice issue” and “@POTUS must #CancelStudentDebt” — a tweet that Sen. Elizabeth Warren, D-Mass., shared, adding, “Grateful to be in this fight by your side.”

Even Senate Majority Leader Chuck Schumer has made things uncomfortable for Biden. After Klain’s comments became public, Schumer tweeted: “Today would be a great day for President Biden and Vice President Harris to #CancelStudentDebt.”

This pressure from fellow Democrats contributed to Biden’s last-minute decision in December to extend the repayment pause from Jan. 31 to its current date, May 1, even though the Education Department had already begun sending notices to borrowers.

In fact, over the past two years, the department has sent nearly 385 million emails alone to borrowers alerting them to approaching deadlines, only to see those deadlines evaporate half a dozen times when the Trump administration and then the Biden administration announced another extension. The result: confusion for borrowers.

Now comes this email to loan-servicing companies that appears to be an effort to prevent another raft of confusing borrower notices around another deadline that could evaporate.

There are risks to resuming repayment in May

There are big logistical and political risks to requiring tens of millions of borrowers to resume repayments in May.

Logistically, two mammoth student loan servicers, Navient and FedLoan, are winding down their federal contracts, leaving the Education Department to shift millions of borrowers to other servicers. That could make it harder for some to get the help they’ll need changing repayment plans or monthly payments — not the kind of frustration Democrats want lingering into an election season.

Which is the biggest problem with May, as anyone with a calendar will tell you: It is dangerously close to the midterm elections in November. Asking borrowers to resume repaying student loans ahead of those elections offers little political upside for Democrats.

What’s more, liberal Democrats who have been pushing for debt cancellation may see a return to repayment as Biden abandoning his campaign pledge, because it makes little sense to force borrowers — and the government — back into debt repayment and collection if cancellation is on the way. If, instead, Biden extends the deadline, even if he continues to avoid a decision on cancellation, the pandemic pause becomes an election-season asset for Democrats, rather than a liability.

“Joe Biden is the only president in history where no one’s paid on their student loans for the entirety of his presidency,” Klain said on the podcast, clearly test-driving a talking point for borrower voters.

And some borrower advocates who have pushed Biden hard on cancellation are already throwing their support behind another extension of the repayment pause.

“This is one of the rare cases where economics, politics, policy and common sense all push in the same direction,” said Mike Pierce, executive director of the Student Borrower Protection Center, in a statement to NPR.

“When every other aspect of American life is more expensive in the wake of the pandemic, student loans don’t need to be. It appears that President Biden and Vice President Harris recognize this and will once again step up to protect people with student debt,” Pierce said in response to news of the department’s email to loan servicers.

Biden’s conservative critics argue enough is enough

When student loan interest and payments were first paused in March 2020, as part of the CARES Act, borrowers were in the vise grip of the pandemic and the pause enjoyed bipartisan support — as did moves to extend it, at least long enough for the economic effects of the pandemic to recede and for borrowers to get back on their feet.

Despite inflation hitting another 40-year high, hiring is rebounding. Critics of another extension also point out that the pause on interest and payments has cost the federal government, along with taxpayers, at least $95 billion.

This rumored extension “makes clear that the President is comfortable using the narrative of a permanent pandemic to advance [his] policy preferences behind closed doors,” Rep. Virginia Foxx of North Carolina said in a statement to NPR. She’s the top Republican on the House Education Committee.

“Hardworking taxpayers are tired of having their backs broken by this President. Another repayment freeze only begets unfairness that is inevitably leveled at both taxpayers and responsible borrowers alike,” Foxx said.

In a statement to NPR, an Education Department spokesperson would not confirm that the repayment pause would continue beyond May 1, but wrote, “from Day One, the Biden-Harris Administration has been committed to providing meaningful relief to student loan borrowers including the 41 million borrowers who have saved tens of billions as a result of the extended student loan payment pause. The Department will continue communicating directly with borrowers about federal student loan repayment by providing clear and timely updates.”

And yet borrowers eager to know when, exactly, they’ll be expected to resume repaying their student loans will have to wait a little longer.

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Transcript :

RACHEL MARTIN, HOST:

For two years now, payments and interest on federal student loans have been put on pause because of the pandemic. They are supposed to restart in May. But the U.S. Department of Education recently sent an email that has thrown that deadline into doubt. We are joined by NPR education correspondent Cory Turner to help us sort through all this. Hey, Cory.

CORY TURNER, BYLINE: Hey, Rachel.

MARTIN: OK, so this is about an email?

TURNER: Yeah.

MARTIN: Explain what’s going on here because this affects a lot of people, right? – 40 million Americans with federal student loans.

TURNER: It does. Yeah, the internal email was sent by Ed Department officials to representatives of the government’s big student loan servicers.

MARTIN: OK.

TURNER: So, Rachel, these are the companies that actually deal with borrowers and manage their payments. And the email said, interestingly, don’t reach out to borrowers about the fact that they are supposed to start repaying their loans in May. Don’t send any heads-up, no billing statements, no reminders. The email was obtained by NPR and first reported by Politico. Now, it did not say explicitly that this payment moratorium would be extended. And when I reached out, neither the Ed Department nor the White House would confirm an extension. But it is not a stretch to say this email means an extension is possible, if not likely because the department has a legal obligation to communicate with borrowers multiple times before payments can restart, and it is simply running out of time.

MARTIN: OK, so people who pay on these loans have had a two-year reprieve. Why would the administration think about extending that?

TURNER: So I think there is lingering concern about restarting loan payments with inflation as high as it is. But it also seems pretty clear, Rachel, the White House is really grappling with what to do about student loans overall because remember, in President Biden’s own party, there are many who are pretty frustrated with him because he campaigned on canceling at least $10,000 in debt per borrower, something he hasn’t done. So liberal Democrats in Congress, including Senators Elizabeth Warren and Majority Leader Chuck Schumer – they’ve been pushing Biden to cancel student debt.

A few days before this Ed Department email went out, the White House chief of staff, Ron Klain, appeared on the podcast “Pod Save America”.” And Klain promised clarity. He said Biden would either make a decision once and for all about cancellation before this moratorium is supposed to end in May, or, Klain said, Biden will extend the pause again. It’s also worth remembering this payment moratorium has already been extended several times by both the Biden and the Trump administration. So ultimately, you know, from the department’s point of view, this email to servicers is really the department’s way of trying not to confuse borrowers any more than they already are.

MARTIN: Except if you’re a borrower listening to our conversation (laughter), aren’t you more confused at this point? Even though our job is to create clarity, yes.

TURNER: (Laughter) Yeah. So look. My overriding advice to borrowers is for the moment, they still need to assume that they’re going to have to start repaying their loans in May…

MARTIN: OK.

TURNER: …Until there is something official otherwise saying so. The challenge, we need to remember, for Biden here, though, is that the May return to repayment is really pretty close to November’s midterm elections. And that puts the White House in a real bind. You know, Republicans are pushing back now, saying they supported the pause at the beginning of the pandemic, but hiring is booming. Not collecting on these loans has cost the government a lot of money. But it also doesn’t take a political genius to know, Rachel, you know, for Biden and Democrats, there is very little upside in asking tens of millions of borrowers to restart their student loan payments right before they go to the polls.

MARTIN: NPR’s Cory Turner. Thank you, Cory.

TURNER: You’re welcome, Rachel. Transcript provided by NPR, Copyright NPR.