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The Trump administration on Friday suspended all federal student loan payments through January and left interest rates at 0%, extending a moratorium that started early in the pandemic but was due to expire later this month.
By extending payments by a month, the administration leaves it to the Biden administration or Congress to decide whether to provide longer-term relief to millions of student borrowers. The measure was included in an aid package in March and extended by the White House in August, but its fate was in doubt in the face of a stalemate over a new aid law.
In announcing the extension, Education Minister Betsy DeVos reprimanded Congress for inaction. “The extra time also allows Congress to do its job and determine what actions it believes are necessary and appropriate,” DeVos said in a statement. “Congress, not the executive, is responsible for student credit policy.”
As part of the measure, students will not be required to pay, their loans will not bear interest and all collection activities will be suspended until the end of January.
DeVos was commended for using her authority to suspend federal student loan payments in March. Congress later cemented the measure into legislation and Trump extended it to December, but the looming deadline fueled fears that millions of borrowers would be forced to resume payments despite rising unemployment.
Last month, the American Council on Education and dozens of other college associations urged DeVos to extend relief, saying the recent surge in COVID-19 cases was likely to add even more economic turmoil.
“Paying back millions of Americans in the midst of this crisis will create additional financial hardship and force borrowers to make difficult decisions about their limited resources,” the groups wrote in a letter to DeVos.
Even DeVos’ own agency warned of impending difficulties if the moratorium should expire. In its annual report last month, Bundesstudienhilfe, the agency responsible for student loans, said that without an extension it would be exposed to a “heavy burden” to induce millions of borrowers to actively repay at the same time.
President-elect Joe Biden did not address the moratorium directly but called for immediate relief Tuesday, including “rent and student loan exemptions”. He has also backed proposals to pay off up to $ 10,000 in student debt for all borrowers as part of a future virus relief package.
In Friday’s announcement, DeVos said her agency was working to notify the credit service companies that the Department of Education is signing collections management contracts with. A federal lawsuit filed against DeVos in April alleged thousands of overdue borrowers still withhold their payments despite the mortar. The department blamed its service providers for the mistake.
DeVos’ press release on Friday stated that all defaulted borrowers who continue to have wages withheld will receive refunds.