The ongoing student loan pause has been in effect for nearly three years. The pause has suspended payments and frozen interest accrual for borrowers with government-held federal student loans, and it has halted all collections efforts against defaulted federal student loan borrowers.
First enacted by President Trump via executive order during the early days of the Covid-19 pandemic, a combination of Congressional legislation and subsequent executive action by both Trump and President Biden resulted in multiple extensions. Biden’s most recent extension is set to end later this summer.
There were many instances during the last three years when the student loan pause was seemingly about to end, only to be extended again, often at the last minute. But this time, there are several reasons why the pause may actually — really — be coming to an end. And borrowers should prepare for payments to resume.
Biden’s end of Covid emergency may remove basis for extending the student loan pause again
The student loan pause was enacted in direct response to the Covid-19 pandemic. While Congress codified the relief through legislation when it passed the CARES Act in March 2020, the statutory relief was only set to last six months.
To extend the relief beyond September 2020, both the Trump and Biden administrations relied on the HEROES Act of 2003. That statute, passed unanimously by Congress, allows the Education Department to modify federal student loan programs for borrowers who have suffered economic hardship “in connection with a war or other military operation or national emergency,” such as a pandemic.
The HEROES Act, and the ongoing national emergency associated with the Covid-19 pandemic, provided the legal authority for each extension of the student loan pause.
But this week, the Biden administration announced that it would officially end the national emergency this May. Officials have indicated that this does not mean the student loan pause will have to end early, and Biden’s earlier extension will stand.
However, the end of the national emergency may make it harder for the administration to justify any further extension of the student loan pause. Administration officials could argue that the end of the national emergency does not necessarily mean that the associated economic harm that millions of borrowers experienced has ended, thus justifying yet another extension.
And indeed, the HEROES Act does not necessarily require the national emergency to be in effect at the time that associated relief is granted. The relief simply must be designed to address hardships incurred by borrowers as a result of the national emergency.
Nevertheless, a further extension of the student loan pause may be politically and, perhaps legally, fraught for the administration. With Republicans now holding a narrow majority in the House of Representatives, another extension of the pause could invite scrutiny from key congressional committees and possibly legal challenges, as well.
Supreme Court set to rule on student loan forgiveness this summer
President Biden’s wide-scale student loan forgiveness plan would have provided $10,000 or more in student loan forgiveness to up to 40 million borrowers. But last fall, several lawsuits resulted in federal courts blocking the plan. The Supreme Court has agreed to review two legal challenges to the Biden student loan forgiveness initiative. Oral arguments will take place later this month, and a decision is expected by this June.
The Biden administration tied the most recent extension of the payment pause not only to the ongoing pandemic, but also to the Supreme Court’s review of Biden’s student loan forgiveness plan — which the administration is also saying is relief authorized by the HEROES Act of 2003 due to the financial harms incurred by borrowers during the pandemic.
The administration has said that the student loan pause will end within 60 days of either June 30, 2023, or whenever the Supreme Court issues a final decision on Biden’s student loan forgiveness plan — whichever occurs first.
If the Supreme Court sides with the Biden administration and upholds the student loan forgiveness plan, payments are widely expected to resume. The administration has previously linked the student loan forgiveness initiative to the end of the student loan payment pause, with some officials arguing that the resumption of payments would offset some of the potential inflationary impacts of mass debt cancellation.
If the Supreme Court rejects the administration’s legal arguments and rules that the one-time student loan forgiveness plan is illegal, Biden officials will be faced with a set of imperfect options. While one option, in theory, could involve extending the student loan pause yet again, doing so without the national emergency in place could be difficult.
Consumer advocates have urged the administration to consider other legal authorities to cancel student debt and extend the payment pause again, but top officials have suggested that there is no backup plan in the works.
What borrowers should do about the student loan pause
It is difficult for borrowers to navigate this uncertainty. While there are clear reasons to anticipate that the student loan pause might really end this summer, nothing is guaranteed.
There are also reasons the pause could very well be extended again. In particular, there is growing concern within the Education Department about the Biden administration’s ability to implement an array of related student loan relief initiatives, given that Congress’s recent omnibus bill did not include any additional funding requested by the Office of Federal Student Aid.
In addition, many consumer advocates have expressed growing alarm that the Education Department’s contracted student loan servicers will not have the operational capacity to handle 40 million borrowers all returning to repayment simultaneously. These could be very real reasons for the Biden administration to explore further extensions of the payment pause beyond June 30.
But while borrowers should hope for the best, they should also prepare for the worst and get ready to resume repayment later this summer. Borrowers should be sure to do the following:
- Check for student loan servicing changes by logging in at StudentAid.gov. If your loan servicer has changed, create an online account with your new loan servicer so that you can access your loan details and make payments when the time comes.
- Update your contact information – including your email address – with your student loan servicer and at StudentAid.gov.
- Evaluate whether you need to apply for an income-driven repayment plan, or have your income-driven payments recalculated if your financial circumstances have worsened since 2019 or 2020, or you’ve experienced other major life changes, such as getting married or divorced.
- Evaluate your eligibility for relief under temporary, one-time initiatives such as the IDR Account Adjustment.