Decision on student loans coming ‘soon’, education secretary says

US Education Secretary Miguel Cardona said on Tuesday that conversations with the White House were ongoing and borrowers should have answers soon.

WASHINGTON — Student borrowers will “soon” be notified of an extended pause on student loan repayments and possible debt forgiveness, the U.S. Secretary of Education said in an interview Tuesday, but no decision. has not yet been taken.

The break expires on August 31. With just over two weeks to go until the deadline, borrowers and student loan servicers are growing weary with no guidance.

“We have daily conversations with the White House and borrowers will know directly and soon from us when a decision is made,” US Secretary of Education Miguel Cardona told CBS News.

The White House has said Biden will make a decision by the end of August.

While it’s unclear whether Biden will issue some sort of blanket debt cancellation, it’s unlikely the president will resume required payments so close to the midterm elections and with so little notice to borrowers. In late July, the Department of Education told student loan servicers not to contact borrowers about resuming payments, the Wall Street Journal and NBC News reported, warning that an extended pause is likely. .

The CEOs of at least two financial companies are preparing for the moratorium to last until at least January 2023. During second-quarter earnings calls, executives from Navient and SoFi both said they are ‘expected Biden to extend the hiatus and factored that into the trade forecast, though it’s important to note that neither company handles federal student loans for the Department of Education.

“It’s hard for us to believe it won’t be extended,” Navient CEO Jack Remondi told an analyst.

This is the closest timeframe to the moratorium during Biden’s presidency without an update — not counting when Biden extended the hiatus on his first day in office, which he pledged to do during the campaign and before his inauguration.

RELATED: What We Know About the Suspension of Student Loan Payments and Possible Debt Cancellation

Timeline of the student loan moratorium

March 20, 2020: President Trump suspends interest and payments on federal student loans for the first time

March 27, 2020: CARES Act Extends Pause to September 30, 2020

August 8, 2020: Extended until December 31, 2020

December 4, 2020: Extended until January 31, 2021

January 20, 2021: Extended until at least September 30, 2021

August 6, 2021: Extended until January 31, 2022

December 22, 2021: Extended until May 1, 2022

April 6, 2022: Extended until August 31, 2022

Cancellation of debt

The White House said the issues of extending the pause in payments and canceling the debt are being considered separately.

During the campaign trail, Biden supported forgiveness of $10,000 per borrower. But internal negotiations have dragged on for months, as some Democrats call on the president to do more and Republicans firmly oppose any massive effort to cancel the debt.

So far, the Biden administration has taken a more targeted approach to debt cancellation, focusing primarily on students who attended for-profit colleges. After announcing an additional $4 billion this week for students at the now defunct ITT Technical Institute, the administration says it has now approved nearly $32 billion in student debt for $1.6 million. borrowers.

RELATED: With student loan decision expected soon, US writes off debt for 208,000 borrowers

When could it come into force?

According to Politico, the Department of Education has prepared plans for eventual widespread debt cancellation, the magnitude of which would be unprecedented in the history of the federal student loan program.

If Biden gives it the go-ahead, the Education Department is ready to forgive debt within weeks for many borrowers who have income information on file with the agency, documents obtained by Politico show, such than borrowers who have already certified their income for income-oriented repayment plans. While this applies to several million borrowers, most other borrowers would self-report their income to verify their eligibility through the federal student aid website, Politico reports.

Plans indicate the Department of Education is preparing for all types of student loans to be eligible for forgiveness, including Grad and Parent PLUS loans, according to Politico.

Who would qualify?

The White House is considering an income cap for loan forgiveness, according to the Washington Post. Although nothing has been finalized, The Washington Post reported that the cap being considered would be $125,000 or $150,000 for single filers and $250,000 or $300,000 for married couples filing jointly.

According to CNBC, more than three-quarters of borrowers would still be eligible for a discount under these rules.

Borrowers with private student loans are unlikely to see relief. Because their debt is held by private companies, these loans are not subject to federal debt suspension or cancellation.

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