Borrowing

Borrowers 'need to know as soon as possible' about debt forgiveness, advocacy group says

Share
Carol Yepes | Moment | Getty Images
Key Points
  • On Tuesday, U.S. Secretary of Education Miguel Cardona said the student loan payment pause "could be" extended beyond August 31, 2022.
  • The pandemic-era relief policy pausing the repayment of federal student loans has been in place since March 2020.
  • "Borrowers have been waiting two and a half years," for a decision on loan forgiveness, says Natalia Abrams, the founder and executive director of Student Debt Crisis. "Their financial lives have been put on hold and they need to know as soon as possible."

New reports on the payment pause for federal student loan borrowers and potential debt forgiveness have been making headlines this week.

President Joe Biden is unlikely to announce a decision on student loan forgiveness until later this summer, The Wall Street Journal reported on Monday. Meanwhile, during a hearing with lawmakers Tuesday, Education Secretary Miguel Cardona said the payment pause, which is set to expire in September "could be extended." He notes that "borrowers will have ample notice."

Since March 2020, borrowers have had the option to forgo their monthly payments without accruing interest on their federal student loan debt. The pandemic-era relief policy is scheduled to lapse on August 31, but if that date is delayed further, it would be the seventh extension.

More than 43 million borrowers with federal student debt worth about $1.6 trillion have been waiting for an update after Biden said in May he'd be sharing his plans in the next couple of weeks.

"Borrowers have been waiting two and a half years," for a decision on loan forgiveness, says Natalia Abrams, the founder and executive director of Student Debt Crisis, an advocacy group that has been dedicated to reforming student debt and higher education loan policies since 2012. "Their financial lives have been put on hold and they need to know as soon as possible," she says.

Biden leaning towards $10,000 forgiveness per borrower

As for debt cancellation, in late May, the Biden administration was leaning toward forgiving $10,000 in student loans per borrower, The Washington Post reported. To be eligible for debt forgiveness, individuals might have to be making less than $125,000 a year, according to The Wall Street Journal.

Student Debt Crisis and other advocacy groups are pushing for forgiveness of $50,000 or more with no income eligibility threshold. "There's a myriad of reasons to avoid an income threshold," says Cody Hounanian, executive director at Student Debt Crisis Center.

"We know from the research, and from our experience with the current existing student loan program, that these income thresholds are a recipe for preventing the borrowers that need help the most, particularly borrowers of color, from actually getting the relief they need," Hounanian says.

That's because student debt borrowers of color are more likely to take on debt and struggle with repayment for a variety of reasons, according to a May 27 letter written by numerous groups including civil rights, education, climate, health, consumer, labor, professional, food and farm, and student advocacy organizations, including Student Debt Crisis Center. "The disproportionate impact of student debt on borrowers of color exacerbates existing systemic inequities and widens the racial wealth gap," the letter states.

More from Grow: