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Biden administration expected to extend student loan payment pause through August

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Sources tell CNBC that the Biden administration will announce an extension of the payment suspension for Federal Student Loan Borrowers.

It is expected that the pause will last into August. This is the sixth extension for the break which now spans two presidencies.

The current pandemic-era relief program suspending student loans bills will expire in May.

The stay on bills was first proposed by former president Donald Trump in March 2020. It came after the US economy collapsed and the number of jobless rose. A majority of borrowers who are eligible have applied for it. However, only 1% remain to pay the bill, according to Mark Kantrowitz (higher education expert). 

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The country has emerged from the darkest days of the pandemic and the unemployment rate has come back down. The Biden administration expressed hesitation to make student loan forgiveness payments and has resisted the offer of a pause in the payment schedule.

White House Chief-of-Staff Ron Klain said, “The President is going to examine what we should do about student debt before it expires or he will extend the suspension.” said last month on the podcast “Pod Save America.”

Klain stated that Joe Biden is currently the president of the United States who has not paid off student loans during his entire presidency.

Advocates and Democrats warned that the resumption of payments following more than 2 years may have indicated to some that Biden is abandoning his promise to forgive $10,000 student debt. This could lead to negative headlines and lower voter turnout in November.

Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Elizabeth Warren, D-Mass., are pushing the president to cancel closer to $50,000 per borrower.

A recent poll found that 66% of potential voters support the president’s plan to forgive student debt. More than 70% of Latino voters and Black voters also supported this move. found.

Many households faced major financial challenges before the crisis. The amount of outstanding education debt is more than the credit card or auto debt, and exceeds $1.7 trillion. Around 40 million students in America owe school loans, while more than one quarter have outstanding debt. 

But Scott BuchananExecutive director of Student Loan Servicing Alliance (a trade organization for federal student loans servicers) warned that repeat extensions could cause lending problems.

When the government changes its mind, what’s for a borrower? Buchanan said. Buchanan said, “When the inevitable resume will finally occur, millions of borrowers are likely to miss it and become delinquent due to the false expectations that the government is setting.”

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