Student loan pause unlikely to end but near key date

On May 1, the federal government is supposed to resume collections — for the first time in more than two years — from 43 million borrowers on $1.6 trillion in federal student loan debt.

Virtually no one involved in the collection process thinks that will happen, but no extension of the pause has been announced.

“We’re 30 days out — this is ridiculous,” said Natalia Abrams, the founder of the Student Debt Crisis Center, a nonprofit advocacy group. “Borrowers are checking the news every day so they can plan their lives.”

The Education Department, the primary lender for Americans who borrow for college, outsources the work of collecting payments to six outside vendors. Last month, it told those loan servicers to hold off on notifying borrowers that their payments would soon be due.

The servicers took that as a sign that the payment pause — which began in March 2020 as a pandemic relief measure, and has now stretched across two presidential administrations — would once again be extended. But with just weeks to go, they’re still waiting for guidance from the government on whether they should start billing borrowers again.

Two officials at different loan servicers said that their businesses had staffed up to be ready for the May 1 restart. The executives, who spoke on the condition of anonymity to avoid alienating government officials, said they were frustrated by the lack of clear instructions.

Those instructions come from the Education Department, which manages federal student loans. But the department is also stuck: It has been awaiting a decision from the White House on extending the pause, according to two department employees who are involved in student loan operations.

Neither the White House nor the Education Department answered questions about whether the May 1 restart date would be pushed back. In separate statements, both said the Education Department would continue communicating with borrowers and servicers, including about “the type and cadence of servicer outreach to borrowers.”

Even lawmakers in Congress have said they were in the dark about the administration’s plans. The two Democratic chairs of the Senate and House education committees — Sen. Patty Murray of Washington and Rep. Robert Scott of Virginia — issued statements March 16 asking the Biden administration to extend the payment pause until 2023.

“The student loan system is broken,” Murray said. “It is ruining lives and holding people back.”

The White House has not publicly responded to that request.

On Thursday, more than 90 Democrats in Congress sent President Joe Biden a letter urging him to extend the payments pause and take executive action to “cancel student debt now.”

They added: “Restarting repayment will financially destabilize many borrowers and their families, and will cause hardship for many who could not afford repayment.”

A Democratic House aide who was not authorized to speak publicly on the matter said that frequent requests to the Education Department for updates have yielded no firm answers about an extension of the moratorium.

But Ron Klain, Biden’s chief of staff, hinted last month on the podcast “Pod Save America” that an extension was under discussion.

“The president is going to look at what we should do on student debt before the pause expires, or he’ll extend the pause,” Klain said. “Joe Biden right now is the only president in history where no one’s paid on their student loans for the entirety of his presidency.”