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Student Loans: Coronavirus-Based Loan Suspension Will Expire Soon

Student loan payment suspension expires on 12/31. That's not great for families.

Will you have to start paying your student loans again?

When the pandemic hit the United States in full force in March, one of the first actions that Congress took through the CARES Act was to help struggling families across the country was to suspend student loan payments. After all, with a record unemployment rate and an economy that basically ground to a standstill, monthly payments to the tune of hundreds of dollars became impossible for many families — and by pausing the payments, Congress protected tons of families from default. 

For the past nine months, people saddled with student loan debt have been able to stop paying down their student loans, interest-free. But by December 31st, that is likely to change — as federal pandemic relief expires on that day and student loan forbearance with it. Unless, of course, the President, or Congress, decides to pass another stimulus package or extend student loan forgiveness on its own. 

It’s likely that won’t happen, however. Congress is in a deadlock over stimulus negotiations and President Trump, who is too busy drumming up baseless allegations of election fraud, doesn’t appear to have his mind on the wellbeing of the American people. But what does it mean if loan forbearance expires on 12/31? When President-elect Joe Biden assumes office on January 20, will families saddled by student debt get relief? Here’s what to know.

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Benefits Expiring on 12/31 Will Leave Biden With A Quagmire

If benefits are left to expire on 12/31, that leaves at least 20 days of student loan services restarting their collections processes. The loans covered under the suspension of payments amount to 85 percent of student loans across the country — trillions of dollars. Even if Joe Biden takes immediate and executive action to cancel student loan payments as the COVID-19 pandemic continues to dent the economy, and makes that retroactive to include payments due from 12/31 to 1/20, that could create a total mess for student loan processors, student borrowers, and more. Basically, it will be an administrative quagmire. 

But just because it will be difficult, doesn’t mean it shouldn’t happen, or that it’s impossible. Big and bold ideas and actions come out of government all the time — and after all, freezing interest and suspending student loan payments during the pandemic was one of those ideas to begin with that probably seemed impossible before COVID-19 threw a hammer to everything. Plus, Biden has legislative options — if he wants to take them, that is.

Biden Could Cancel Student Debt. But How Much Would He Cancel?

President-elect Joe Biden was not initially open to the idea of canceling student debt outright — which is different from suspending payments — when he was on the campaign trail as a primary opponent. But he has at least somewhat changed his tune on that front.

And, on Monday, November 18, Biden didn’t directly answer whether or not he would use an executive action to cancel student debt outright after assuming office. But he has said he supports the stimulus package that the House Democrats have put forth that extends the student loan payment suspension to late 2021 and does cancel $10,000 of student debt. 

Meanwhile, Democrats who flank him from the left, including Senator Elizabeth Warren and Senate Minority Leader Chuck Schumer, have called on Biden to take bold and immediate action on student loans. Both of them asked Trump (and have since appeared to be ready to ask Joe Biden) to immediately cancel up to $50,000 in student loan debt for every single student borrower in the country via executive action, a move that many legal scholars think is possible. That would truly save American families who are drowning in student debt and struggling to make ends meet. 

Would Canceling Student Debt Be Good for the Economy?

Canceling student debt would have a watershed effect on the economy. While it would impact student loan servicers like Navient, etc., it would also immediately increase the spending power of American families who sometimes have thousands of dollars a month strapped up in student loan payments. 

Many economists have suggested that student loans will be the next big ‘bubble’ to burst economically, and by easing the burden of s student loans on those who are paying them right now, the threat of that bubble would be diminished.

Add that to the fact that those who are paying student loans can begin to engage in the hallmarks of traditional wealth accumulation or general economic participation, and canceling student loan could almost act as a stimulus to the economy, helping families engage in consumer actions that they have been unable to afford for years. Some people might even decide to have children, as many people have said the reason they don’t have kids is that they can’t afford it. It would be that fundamentally revolutionary. And it’s worth looking at for that reason alone.