Biden Extended the Student Loan Repayment Freeze Again. Why One Expert Thinks It Might Not Be the Last

A photo to accompany a story about the student loan payment pause extension Chip Somodevilla / Getty Images
President Joe Biden speaks during an event in April. The Biden administration extended the pause on federal student loan payments until Aug. 31.
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President Joe Biden has once again extended the pause on federal student loan payments — this time until Aug. 31. 

It is the sixth extension since the start of the COVID-19 pandemic, and it comes a few weeks before payments were scheduled to restart on May 1, impacting millions of borrowers who have not been required to make payments.

“We saw this extension coming, and I think it also leaves the door open for another extension,” says Robert Farrington, founder and CEO of The College Investor. “The announcement today made clear that Biden is using his powers under the HEROES Act, which requires there to be a national emergency. As such, as long as there is a national emergency, he can continue to extend it.”

A critical piece of the announcement includes a plan to eliminate the delinquent and default status of all borrowers, effectively giving them a “fresh start” when they enter repayment. According to Farrington, it’s a big win for the borrowers who may have been struggling with payments before the pandemic or were seeing their tax refunds garnished.

“With this change, it will help a lot of borrowers get back on track when payments start,” he says.

The Biden administration said it’s extending the pause primarily because Americans are “still recovering from the pandemic and the unprecedented economic disruption it caused.” If loan payments were to resume May 1, analysis of recent data from the Federal Reserve suggests that millions of student loan borrowers would struggle to enter repayment, according to a White House statement

Still, there continues to be a question mark around widespread student loan forgiveness. Biden has hardly made any mention of it since the start of the year, which has inspired new concerns from advocates and borrowers that he’s walking back on one of his key campaign promises. At the start of the 2020 presidential campaign, Biden had repeatedly said he supported the idea of canceling $10,000 per borrower. However, experts we spoke to at the end of 2021 largely agree that borrowers shouldn’t count on it, and should instead focus on ways they can take control of their student debt right now.  

What Does This Extension Mean For Borrowers?

Though this latest extension is a significant development for student loan borrowers, you shouldn’t change how you’re approaching your student loan debt at this time.

Instead, stay the course. If you’ve been taking advantage of this pause to prioritize other aspects of your finances, keep doing that. Overall, experts recommend using these extra months to help divert some money toward building an emergency fund or pay down more pressing high-interest debt, such as credit cards or private student loans

If you feel that you’re in a good spot financially and you want to get ahead of your student loan debt, Farrington recommends setting money aside in a savings account and making a lump-sum payment right before payments start up again. 

Regardless, now is a good time to start planning for when payments ultimately do resume. For example, make sure your personal information on your accounts are updated — such as your address, phone number, and email address — so you can stay on top of any new information about your loans. 

You should also know what you owe, double check the pay-off dates and grace periods for your loans, and review your repayment strategy to see if it aligns with your current financial situation. Lastly, start putting together a future budget now for when payments resume. Take into account any changes to your income and see if you need to cut spending in certain areas to make room for upcoming student loan payments in your budget.

As of right now, federal student loan payments will resume at the end of August, so experts say you shouldn’t set your strategy based on the perceived likelihood that more student loan relief is coming. But it is something to keep an eye out for over the next few months.