Student loan Administrative Forbearance extends Until May
Student loan borrowers, especially recent college graduates like myself, got some relieving news during the Christmas break.
The Biden administration initially set the student loan moratorium to expire on January 31, but due to the ongoing pandemic, the Biden administration has extended forbearance until May 1 of 2022.
Millions of Americans have been able to put off student debt under this measure- giving borrowers a longer extended grace period to prepare for repayment.
Under this action, interest rates will remain at 0%, and debt collectors will suspend their collection protocols. President Joe Biden stated that financial recovery from the pandemic would take longer than job recovery, especially for those individuals with student loans. The Omicron Variant of Covid-19 has raised concerns regarding the current extension. Some worry about whether the economy will improve and allow borrowers to make payments.
"The recent rise in Covid-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation," said Federal Reserve Chairman Jerome Powell. Although much remains unknown about Omicron, the new variant, if it prolongs the pandemic, it could keep prices rising, hurt job growth and affect the stock market. Although borrowers face economic challenges particularly, when forbearance comes to an end, debt collectors will be aggressive in collecting payments. Collectors may even begin taking wages or benefits from those behind on payments.
Outstanding student loan debt in the U.S has surpassed $1.7 trillion. Student debt burdens more Americans than credit card and auto debt. Around a third of borrowers are in delinquency or default. The average monthly payment for these individuals is about $400. Some Democrats are pushing for mass forgiveness of debt, but President Biden has questioned whether he has that kind of authority. Biden has said that he supports canceling up to $10,000 of student debt, but he has stated that it should be done by congress.
Biden urges student loan borrowers to do "their part as well." He said borrowers should explore repayment options, educate themselves on public service loan forgiveness, and look into options through income-based repayment plans.
Terms defined for readers:
Administrative Forbearance: An administrative forbearance is a temporary postponement of your student loan payments, granted by your lender.
Delinquency/default: A delinquent student loan is any student loan that you've missed a monthly payment for. Your federal loans default after you miss more than 9 student loan payments (270 days).
Moratorium: A moratorium is a temporary halt of business as usual, or a suspension of some law or regulation. Most of the time, moratoriums are intended to alleviate short-term financial hardship or provide time to resolve related issues. In bankruptcy law, a moratorium is a legally-mandated hiatus in debt collection from creditors.