Millions of Americans breathed a sigh of relief Monday night as Congress passed a $ 900 billion incentive bill which includes $ 600 checks and the extension of unemployment benefits. But the aid package does not address a financial crisis that is building long before the pandemic strikes: student loan debts.
Starting next month, tens of millions of student loan borrowers will be forced to resume all payments after nearly a year of indulgence. An extension of the grace period was included in previous drafts of the bill, officially known as the Coronavirus Response And Relief Supplemental Appropriations Act, but was cut in the final negotiations.
Student loan debt was a catastrophe approaching the pre-pandemic, but widespread job losses and reduced wages especially among millennials, aggravated the problem. This year, student loan debt reached a record high of nearly $ 1.6 trillion among more than 40 million Americans, according to the Federal Reserve Bank of New York. On average, student loan borrowers have debts between $ 200 and $ 299 each month, according to the Federal Reserve. For many, debt is simply unbearable; about one in five lenders are missing, according to the US Department of Education.
In March, the Department of Education suspended all monthly federal loan payments, granting all borrowers an interest-free tolerance period until October. In August, an executive order from President Trump extended the program until December, and earlier this month, Education Secretary Betsy DeVos extended the grace period until January.
“The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary pause in payments will help those affected,” DeVos said in a Dec. 4 statement when the extension was announced. “The added time allows Congress to do its job and determine what measures it deems necessary and appropriate. The Congress, not the Executive Directorate, deals with the student loan policy ”.
A Pew study in November found that nearly six in ten borrowers said it would be “somewhat” or “very difficult” to resume payments on their loans next month.
It is still possible that the popular tolerance program will be extended again after President-elect Joe Biden takes office on January 20. Along the way, Mr. Biden pledged to address the student loan crisis, including the cancellation of the $ 10,000 debt for students working nationally or working for the community.
When student loan payments resume, the Department of Education does not expect a smooth transition. In its 2020 annual report, the department said it expects lending services and the federal government to face a heavy burden in “turning” millions of borrowers into active repayment. ” Some of these borrowers, the report warns, will become delinquents.