Millions of Americans breathed a sigh of relief Monday night when Congress passed a $ 900 billion incentive bill that includes $ 600 checks and comprehensive unemployment benefits. But the aid package is not a solution to a financial crisis that started long before the outbreak of the pandemic: debt for student loans.
Starting next month, tens of millions of student loan borrowers will have to resume all payments after nearly a year of patience. An extension of the grace period was included in the early versions of the bill, known officially as the Coronavirus Response and Relief Supplemental Appropriations Act, but was dropped in the latest negotiations.
Student loan debt has been an impending catastrophe since before the pandemic, but widespread job losses and wage cuts, especially among millennials, have made the problem worse. Student loan debt hit a record high this year, nearly $ 1.6 trillion among more than 40 million Americans, according to the Federal Reserve Bank of New York. According to the Federal Reserve, student loan borrowers owe an average of between $ 200 and $ 299 per month. For many, the debt is simply unsustainable; About one in five borrowers is in default, according to the United States Department of Education.
In March, the Department of Education suspended all monthly federal loan payments, giving all borrowers an interest-free waiting period until October. In August, an executive order from President Trump extended the program through December, and earlier this month, Education Secretary Betsy DeVos extended the grace period to January.
“The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary interruption in payments will help those affected,” DeVos said in a Dec. 4 statement when the extension was announced. “The additional time also allows Congress to do its job and determine what action it deems necessary and appropriate. Congress, not the executive, is responsible for student loan policies.”
A November survey by Pew found that nearly six in ten borrowers said it would be “somewhat” or “very difficult” to restart their loan payments the following month.
It is still possible that the popular forbearance program will be renewed again after President-elect Joe Biden takes office on Jan. 20. On the campaign trail, Mr. community service.
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 lenders and that the federal government will “face a heavy burden by turning millions of borrowers into active repayment.” Some of those borrowers, the report warns, will become overdue.