Source: United States Senator for New Jersey Bob Menendez
WASHINGTON D.C. – Today, U.S. Senators Bob Menendez and Cory Booker (both D-N.J.) joined Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Elizabeth Warren (D-Mass.) in sending a bicameral letter to President Biden calling on him to extend the pause on federal student loan payments until at least March 31, 2022. Representatives Ayanna Pressley (D-Mass.-7), and Joe Courtney (D-Conn.-2) led the effort in the House of Representatives.
During the COVID-19 pandemic, executive actions by former Education Department (ED) Secretary Betsy DeVos and the passage of the Coronavirus Aid, Relief and Economic Security (CARES) Act paused payments for millions of borrowers. Recognizing the significant burden that student debt places on borrowers during an economic crisis, President Biden extended this pause through September 30, 2021, for the 87% of borrowers with direct federal loans. During this pause, ED has provided approximately $72 billion in relief on student loan interest alone – money that has been reinvested into the economy. Borrowers have reported being able to pay down other debt, relieve financial pressures from lost jobs or decreased earnings, and support their families.
However, student loan payments are currently scheduled to resume on October 1, 2021. This could create an unnecessary drag on the economic recovery, especially with unemployment benefits also set to expire in September. Following past emergency suspensions of student loans during natural disasters, increased numbers of borrowers became delinquent or defaulted on their loans.
“The scheduled resumption of student loan payments in October could create a significant drag on our economic recovery. Before the pandemic, the average student loan payment was between $200 and $299 per month – a substantial part of a household budget, and money that is desperately needed for basic needs,” the lawmakers wrote.
Extending the pause on payments would provide ongoing relief for student loan borrowers, who are disproportionately women and people of color, the same groups that have been more adversely affected by the pandemic. It would also give ED more time to prepare for payments to resume.
“We urge you to act quickly to extend the current pause on payments and interest so that borrowers are not penalized and student debt payments do not drag down the pace of our economic recovery. Specifically, we ask that you extend the pause by at least six months—until March 31, 2022—or until the economy reaches pre-pandemic employment levels, whichever is longer,” the lawmakers concluded.
The letter was signed by Sens. Edward J. Markey (D-Mass.), Sherrod Brown (D-Ohio), Ron Wyden (D-Ore.), Richard J. Durbin (D-Ill.), Bernie Sanders (I-Vt.), Chris Van Hollen (D-Md.), Alex Padilla (D-Calif.), Mazie Hirono (D-Hawaii), Jeff Merkley (D-Ore.), Tina Smith (D-Minn.), Tammy Duckworth (D-Ill.), Richard Blumenthal (D-Conn.), Sheldon Whitehouse (D-R.I.), Brian Schatz (D-Hawaii), Jack Reed (D-R.I.), Patrick Leahy (D-Vt.), and Kyrsten Sinema (D-Ariz.). This letter was also signed by another 40 members of the House of Representatives.
Text of the letter can be found HERE and below.
Dear President Biden:
We are writing to urge you to act swiftly to extend the current pause on payments and interest for federally-held student loans. The United States faces a historic student debt crisis, with many of the nearly 43 million Americans with student loans being crushed under almost $1.6 trillion in debt. Even before the coronavirus disease 2019 (COVID-19) pandemic, roughly one million borrowers were defaulting on their student loans every year.
The suspension of payments and interest during the pandemic has provided essential relief to borrowers and their families during this economic and public health crisis. Restarting payments, however, will present a significant challenge for borrowers, loan servicers, and the Department of Education (ED), and we urge you not to let the payment pause lapse when borrowers are still depending on this financial relief. We urge you to act quickly to extend the current pause on payments and interest so that borrowers are not penalized and student debt payments do not drag down the pace of our economic recovery. Specifically, we ask that you extend the pause by at least six months—until March 31, 2022—or until the economy reaches pre-pandemic employment levels, whichever is longer.
Borrowers have reaped significant benefits from the ongoing payment pause, taking the opportunity to pay down other debt, relieve financial pressures from lost jobs or decreased earnings, and support their families’ needs. To date, the ED has provided approximately $72 billion in relief on student loan interest alone – money that has been reinvested into the economy. The pandemic has wreaked havoc on our economy and caused prolonged unemployment for many households. While the economic recovery is in progress, additional financial support is needed by students and families throughout the summer, when eviction and foreclosure moratoriums may lapse, and beyond September, when the extended unemployment benefits from the American Rescue Plan are set to expire.
Even as the economic recovery picks up steam, it is not reaching all Americans equally. Women and people of color have been disproportionately harmed by the pandemic, which some experts have deemed “the most unequal recession in modern U.S. history,” and they have recovered at a slower rate. The same groups make up a disproportionate share of student borrowers. Black students, in particular, borrow more to attend college, borrow more often while they are in school, and have a harder time paying their debt off than their white peers. The median Black borrower still owes 95% of their debt twenty years after starting college, compared to only 6% for the median white borrower. Communities of color and Native communities have also had higher rates of illness and death from COVID-19, and higher unemployment rates throughout the pandemic at every age and education level.
Women hold nearly two-thirds of the nation’s student debt, in part because they need higher levels of educational credentials to earn the same compensation as men. They were also more likely to lose their jobs or leave the workforce in 2020 than men, due to a combination of factors: women-dominated industries like health care and hospitality saw more job losses, and school and child care closures forced many women to leave the workforce in order to care for their families. On the other side of the crisis, women also make up disproportionate shares of essential workers, especially in health care, where more than three-quarters of workers are women. One analysis found that health care and social assistance workers had the highest student debt burden of any industry, with an average payment of $685 per month.
The scheduled resumption of student loan payments in October could create a significant drag on our economic recovery. Before the pandemic, the average student loan payment was between $200 and $299 per month – a substantial part of a household budget, and money that is desperately needed for basic needs. While our federal student aid system offers several income based repayment plans that allow struggling borrowers to lower their monthly payments, the enrollment process for these options is complex and lengthy, and student loan servicers are concerned that they will be overwhelmed by the number of borrowers who will need to navigate this process in a short period of time after a significant length of time in which they had little to no contact with borrowers. Following past emergency suspensions of student loans during natural disasters, an increased number of borrowers became delinquent or defaulted on their loans. A wave of student loan defaults would cause long-term damage to borrowers’ credit and financial stability and could put a sudden and unnecessary drag on the recovering economy.
This decision cannot be delayed. Borrowers, ED, and loan servicers will need time to prepare for any changes to the current situation, including the scheduled resumption of payments and interest. Under the previous Administration, there was little accountability for loan servicers to sufficiently support borrowers and prepare them to reenter repayment. The Administration is still in the process of improving the student loan repayment system and raising expectations for customer service and borrower outreach. We believe that resuming payments before this system is in place could harm vulnerable student borrowers who are unprepared for relief to end. For these reasons, we encourage you to use your authority to provide immediate relief to borrowers by extending the pause on payments and interest by at least six months or until pre-pandemic levels of employment are reached.
Finally, we also understand that you are in the process of reviewing your legal and policy options for executive action related to student debt cancellation and are in the progress of making improvements to student loan relief programs, such as Public Service Loan Forgiveness, borrower defense, closed school discharge, and Total and Permanent Disability discharge through upcoming negotiated rulemaking. We encourage you to complete as many of these processes and reviews as possible before any federally-held student loan payments resume. However, given the fast-approaching deadline for borrowers to resume payments, it is critical that the Administration act as quickly as possible to extend the pause on payments and interest.
Thank you for your attention to this important matter.
Sincerely,
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