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Biden administration extends pause on federal student loan payments until May

The moratorium was initially set to expire at the end of January.
Activists And Musicians Gather At The White House To Greet The Staff With Joyful Music And A Demand To Cancel Student Debt
Activists call on President Joe Biden to cancel student debt and payment of loan debt outside the White House on Dec. 15.Paul Morigi / Getty Images for We, The 45 Million

WASHINGTON — The Biden administration announced Wednesday that the moratorium on federal student loan payments would be extended through May 1 as the highly transmissible omicron variant of the coronavirus poses a new threat to the economy.

In a statement, President Joe Biden said "millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments."

The White House maintained for months that Biden would not extend the pause beyond the Jan. 31 deadline, warning borrowers that they should be prepared to resume payments in February even as Covid case numbers increased and as inflation concerns gripped the country.

The administration's language began to soften in recent days as the omicron variant spread rapidly, with White House press secretary Jen Psaki telling reporters Tuesday that Biden had "not made a decision yet" about whether to issue another extension.

Debt relief advocates and some Democratic lawmakers had pressured Biden to extend the moratorium, especially after Sen. Joe Manchin, D-W.Va., said he would not vote for Biden's Build Back Better Act, throwing its prospects into doubt. The White House has said the plan would address inflation concerns by lowering costs for purchases like prescription drugs and child care.

"The Omicron variant is a scary reminder that the pandemic is still a serious concern and Americans cannot be crushed by student debt as they shoulder this health and economic crisis," Natalia Abrams, the president of the Student Debt Crisis Center, said in a statement.

Some Democrats have also argued that it would be a poor political decision for Biden to restart student loan payments — which have been paused for nearly two years — ahead of a difficult midterm elections year.

Rep. Alexandria Ocasio-Cortez, D-N.Y., tweeted last week that it was "delusional" to believe Democrats could get re-elected without acting on student debt relief, among other priorities.

The moratorium began in March 2020, when former President Donald Trump signed into law the CARES Act, which paused payments through September 2020 and eliminated interest rates for the roughly 42 million borrowers.

Trump later took executive action to extend the deferral period through January 2021. Biden, on his first day in office, signed an executive order continuing it through Sept. 30.

The Biden administration extended the moratorium again in September, giving borrowers until Jan. 31 before they would have to resume making payments. The Education Department said at the time that it would be the "final extension" and that it felt that a "definitive end date" would reduce the risk of delinquency and defaults once payments restart.

The moratorium does not apply to borrowers with privately held loans.

Advocates and some Democratic lawmakers have pressured Biden to take executive action to wipe out up to $50,000 in federal student loan debt for all borrowers. Biden has said that he does not believe he has the authority to cancel student debt unilaterally but that he would support Congress' passing a bill to cancel $10,000 in debt for each borrower.

In a joint statement Wednesday, Senate Majority Leader Chuck Schumer of New York, Sen. Elizabeth Warren of Massachusetts and Rep. Ayanna Pressley of Massachusetts applauded Biden for extending the pause but urged him to take more aggressive action.

"Extending the pause will help millions of Americans make ends meet, especially as we overcome the Omicron variant," they wrote. "We continue to call on President Biden to take executive action to cancel $50,000 in student debt, which will help close the racial wealth gap for borrowers and accelerate our economic recovery."

The White House has said the Education Department is reviewing Biden's legal authority to wipe out student debt through executive action, but it has not provided a timeline for the review. White House chief of staff Ron Klain had initially suggested that the review would be completed this spring.

The Federal Reserve estimated that Americans owed more than $1.7 trillion in student loans in the third quarter of 2021. Studies show that students of color are more likely to take on student debt and struggle disproportionately to pay it back. The highest default rates are among students who attended for-profit institutions.