With millions of federal borrowers set to start paying off their student loans in about two months, a group of Democratic senators are calling on President Joe Biden to waive interest, which was set at zero percent during the major part of. The move could save borrowers millions of dollars a month, even if repayments resume.
The Biden administration announced in August that an extension of the student loan repayment pause — giving some 42 million borrowers a break — would continue through Jan. 31, 2022 as people continued to battle the pandemic. . Student loan repayments had been on hold since March 2020, when COVID-19 plunged the United States into an economic crisis. Interest should also pick up when lending resumes. But the group of 14 lawmakers want the interest waived until the health emergency over the coronavirus pandemic is over.
“Accumulating student loan interest can be a daunting challenge for borrowers with the lowest incomes or the heaviest student debt burdens,” the senators said in the letter to Biden on Monday. The group noted that the debt has also had a disproportionate impact on black, Latino and indigenous communities.
“Continuing to waive interest on student loans will provide borrowers with vital financial support at a time when students, borrowers and higher education institutions are still recovering from the economic and academic disruptions caused by the pandemic, including the rising costs,” the senators, led by Sen. Raphael Warnock of Georgia, said in the letter.
According to the Department of Education, removing interest on student loans saves borrowers about $5 billion per month. This represents more than 100 billion dollars since the start of the pandemic. Lawmakers argue that the extra money saved by borrowers can be spent on other necessities such as food and shelter.
At the same time, the senators are calling on the Biden administration to give borrowers who have already defaulted on their federal student loans a “fresh start” by automatically rehabilitating the loans.
At the end of the payment pause, borrowers who were in default could begin to see steps resume such as negative reports to credit agencies, calls from collection agencies, and garnishment of certain wages and benefits. Lawmakers said that by rehabilitating these loans, “the administration can change the lives of millions of borrowers with the stroke of a pen.”
Last week, a group of Democratic senators alsoto some of the largest student loan servicers requesting more information on some of the steps they are taking to communicate with borrowers and prepare them for the resumption of loan repayments.
The Biden administration has said the extension suspending payments until January next year will be the “final”. The White House has not announced any updates since then. In their letter, the lawmakers asked the president to act on their request to waive interest payments “as soon as possible.”