The Biden Administration has given student loan borrowers an early Christmas present, extending the pause on payments until May 1.
“We know that millions of student-loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments,” the president said in a statement issued Wednesday (Dec. 22).
According to the U.S. Department of Education, the extension will allow the administration to determine how the Omicron variant will impact student borrowers, giving them more time before the resumption of payments.
The department said the pause, which had been scheduled to end Jan. 31, will help 41 million borrowers save $5 billion a month. The administration says it encourages borrowers to use this time to make sure their contact information is current and to consider “enrolling in electronic debit and income-driven repayment plans to support a smooth transition to repayment.”
The administration’s decision represents a stark shift in policy over the last few days.
“We’re still assessing the impact of the omicron variant, but a smooth transition back into repayment is a high priority for the administration,” White House Press Secretary Jen Psaki said last week.
According to estimates from the Roosevelt Institute, the average federal student loan borrower was paying $393 per month in student loan debt before the pause.
And as PYMNTS noted earlier this month, recent findings from the Federal Reserve of New York show total household debt topping $15 trillion, having increased by $286 billion over the most recent quarter.
Mortgage balances rose by $230 billion to hit $10.7 trillion at the end of September, while student loan balances rose by $14 billion.
All of this adds up to more pressure on the paycheck-to-paycheck population, which has risen by 3%, from 54% to 57%, in the past few months.