The U.S. government passed many relief packages during the pandemic, with one of the most prominent affecting student loan repayments. Student loans represent some of the largest sources of debt in the United States, with an estimated 46 million Americans owing student loans.
On average, students graduating college owe close to $40,000. Most students take around 20 years to fully pay off their student loan, contributing between $450 and $500 each month.
Student loan debt was already an issue before the pandemic, but it worsened as recent grads struggled to find jobs due to the limited number of positions. Many businesses were too busy making the shift to remote work to even consider hiring new employees.
There were also some complications for students currently attending college, as many universities shifted to a digital curriculum.
The Future of Student Loans
In March 2020, President Biden signed an order to halt student loan repayments. The Biden administration order was extended several times, and the most recent order extends this pause until August 2022.
This recent extension has caused turbulence among many politicians, with some senators supporting the extension to help families still struggling financially. Others argue that pausing student loans is costing the government too much money. Because of these pauses, the government has lost out on over $100 billion.
Student Loan Forgiveness
There are also some lawmakers who feel a pause does not go far enough. These lawmakers are pushing for the Biden administration to instead forgive existing student loan debt. Unlike a pause, student loan forgiveness means the debt is entirely wiped away and does not have to be repaid whenever payments resume.
Some lawmakers want all student loans to be forgiven, while others are calling for more moderate plans, setting limits on how much debt can be forgiven. While running for office, President Biden proposed forgiving $10,000 for all borrowers. Since he was elected, however, he has not followed up on this promise.
Part of COVID-19 relief did include some changes to student loan forgiveness, which is normally only available under select circumstances. For example, working in lower income areas or with non-profit groups previously allowed student loan forgiveness.
Until October 31st, 2022, all borrowers may apply for student loan forgiveness, even if they do not meet any of the usual requirements. Borrowers who are ineligible may be offered consolidation instead, allowing them to renegotiate their existing debt and get rid of any previously incurred late fees.
Student Loan Extensions
Once the student loan repayment pause extension expires in August 2022, there is no guarantee that the Biden administration will renew it again. Borrowers who are unable to make payments can apply for a federal forbearance. The forbearance is only available for borrowers going through an economic hardship.
Their loans are not forgiven, but they can defer payments for up to 36 months. While eligibility is determined on a case-by-case basis, applicants may have a much greater chance of approval because of the recent pandemic.