Student loan interest is set to kick back in when payments resume, but some Senate Democrats are asking President Biden to waive it
As millions of federal student loan borrowers are set to start repaying their student loans in roughly two months, a group of Democratic senators are calling on President Joe Biden to waive interest, which has been set at zero percent throughout most of the coronavirus pandemic. The move could save borrowers millions of dollars a month even as repayments kick back in.
The Biden administration announced in August that an extension of the student loan repayment pause – giving some 42 million borrowers a break – would run through January 31, 2022 as people continued to struggle with the pandemic. Student loan repayment had been on hold since March 2020, when COVID-19 sent the U.S. into an economic crisis. Interest is also set to kick back in when loans resume. But the group of 14 lawmakers want the interest waived through the end of the coronavirus pandemic health emergency.
"Accumulating student loan interest can be a daunting challenge for borrowers with the lowest incomes or the heaviest student debt burdens," the senators said in the letter Monday to Mr. Biden. The group noted that the debt has also disproportionately impacted Black, Latino and Native communities.
"Continuing to waive student loan interest will provide borrowers with vital financial support during a time when students, borrowers, and higher education institutions are still recovering from economic and academic disruptions caused by the pandemic, including rising costs," said the senators, led by Senator Raphael Warnock of Georgia, in the letter.
According to the Education Department, waiving student loan interest saves borrowers roughly $5 billion a month. That adds up to more than $100 billion since the pandemic began. The lawmakers argue the additional money saved by borrowers can be put toward other necessities such as food and housing.
At the same time, the senators are calling on the Biden administration to give borrowers who have previously defaulted on their federal student loans a "fresh start" by automatically rehabilitating loans.
When the payment pause ends, borrowers who were in default could start seeing steps resume such as negative reports to credit agencies, calls from collection agencies and garnishing of some wages and benefits. The lawmakers said by rehabilitating these loans, "the Administration can change the lives for millions of borrowers with the stroke of a pen."
Last week, a group of Democratic senators also sent a letter to some of the biggest student loan servicers requesting more information on some of the steps they're taking to communicate with and prepare borrowers for loan payments to resume.
The Biden administration has said that the extension pausing payments through January of next year would be the "final" one. The White House has not announced any update since that time. In their letter, the lawmakers asked the president to move on their request to waive interest payments "as soon as possible."