Biden officials signal they might extend student loan payment freeze

The Biden administration dropped a new hint this week that it may further extend the freeze on federal student loan payments for tens of millions of borrowers as the White House weighs a final decision.

Education Department officials instructed the companies that manage federal student loans to hold off on sending required notices to borrowers about their payments starting, according to three people familiar with the matter.

The guidance to loan servicers did not announce a further extension of the payment pause, those people said. But the directive is the clearest indication yet that the Biden administration is leaning toward another extension of the pandemic relief.

White House chief of staff Ron Klain said last week that such an extension was under consideration by the Biden administration as it grapples with a broader question of whether to cancel large swaths of student debt. The administration has not said publicly how long an extension it may consider.

Monthly payments and interest on most federal student loans have been suspended since then-President Donald Trump signed the CARES Act in March 2020. The Trump and Biden administrations both extended the relief through executive action multiple times.

Most recently, the White House in December reversed course at the last minute and announced it was again extending the payment pause after pressure from a wide range of Democrats. By that time, the department and its contractors had already sent millions of notices to borrowers about payments resuming.

The department’s guidance to loan servicers this week reflects the logistical challenges that the agency faces when it comes to switching back on the massive $1.6 trillion portfolio of student loans that’s largely been frozen for the past two years.

Loan servicers are required to send certain disclosures to borrowers before their loans resume or start for the first time — in addition to the slew of outreach planned by the Education Department to remind borrowers about the expiration of pandemic relief.

Some of those notices to borrowers had been set to go out as soon as this month. But they would be moot — and potentially confusing for borrowers — if the White House ultimately decides to again extend the payment relief.

“The Department will continue communicating directly with borrowers about federal student loan repayment by providing clear and timely updates,” an Education Department spokesperson told POLITICO on Tuesday. “The Department’s Federal Student Aid office will also continue communicating regularly with servicers about the type and cadence of servicer outreach to borrowers.”

Progressives have warned it would be a massive political error for the Biden administration to send student loan bills to tens of millions of Americans just before the midterm elections this fall. They’ve also argued that many borrowers are not prepared to resume payment on their student debt.

“Borrowers need immediate relief from the crushing burdens of massive student loan debt as the pandemic exacerbates financial strain for all Americans and throws existing racial disparities in wealth and educational attainment into especially stark relief,” a coalition of left-leaning groups led by the Student Borrower Protection Center wrote in a letter to the White House this week.

The White House in recent weeks has begun framing the student loan payment pause as a major accomplishment. “Joe Biden right now is the only president in history where no one’s paid on their student loans for the entirety of his presidency,” Klain said last week.

Conservatives, meanwhile, are growing frustrated with the Biden administration’s continued extension of the pandemic relief program. Top GOP members of Congress have urged the administration to resume student loan payments, citing the growing cost to taxpayers of suspending interest and monthly payments.

The Education Department estimates that the pandemic relief saves borrowers about $5 billion in interest each month and has increased the cost of the federal student loan program by more than $100 billion over the past two years.

On Tuesday, a coalition of major conservative groups led by Americans for Tax Reform also called on the Biden administration to end the moratorium on student loan payments.

"This policy is fundamentally unfair,” the groups wrote in a letter to Education Secretary Miguel Cardona. “A moratorium on student loan payments is unfair to blue-collared Americans who did not rack up tens of thousands of dollars of debt and those who proactively paid off their debt.”

The Biden administration has also been facing pressure from private student loan refinance companies that have had to compete with the government’s 0 percent interest rate for the past two years.