Student loans aren't canceled yet but Biden will extend pause until September

President Joe Biden announced Wednesday another extension to the payment pause for federal student loan borrowers — this time through August 31. Payments would resume in September. 

"We are still recovering from the pandemic and the unprecedented economic disruption it caused," Biden said, in a statement Wednesday morning.

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 was scheduled to lapse in May, but this would be the sixth extension.

This extension would apply to more than 43 million Americans who owe a total of $1.6 trillion in student debt held by the federal government, according to the U.S. Department of Education. That includes more than 7 million borrowers who have defaulted on student loans, meaning they are at least 270 days late on payments.

Nearly all borrowers eligible for the pause have used it, with just around 1% of them continuing to pay, according to recent data analyzed by education expert Mark Kantrowitz.

Use Grow's loan payoff calculator to run the numbers based on your own loans.

The White House is likely buying itself time to figure out a more permanent solution to the student debt crisis, which student debt reform advocates and politicians have been pushing for, says Kantrowitz.

"The president has an opportunity to pass bold, meaningful relief instead of Band-aid measures," 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. "We urge the president to consider the transformative effect permanent student debt cancellation would have for individuals, their families, and the economy."

In order to cancel student debt, "there are really only three options," Kantrowitz says: Executive action, regulatory policy changes, or Congressional action, each of which has its own set of hurdles.

If you're benefiting from the pause in student loan repayment, Kantrowitz suggests taking these three steps to prepare for when they resume.

1. Create a repayment plan or revisit one you already have during the pause.
2. Start an emergency savings account with the money you would be using to pay back your federal loans.
3. Tackle high-interest debt, like credit card debt or private student loan debt with the money you're not putting towards your federal loans.

Using this time to pay off high-interest debt like credit card debt, which carries an average interest of around 18%, "is going to save you the most money, Kantrowitz says.

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