Those fearing the looming expiration of the federal student loan moratorium can heave a temporary sigh of relief as a one-month extension, from Dec. 31 to Jan. 31, 2021, was granted amid the financial stressors of the pandemic.
“The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary pause in payments will help those who have been impacted,” U.S. Secretary of Education Betsy DeVos said in a statement on Friday announcing the extension. “The added time also allows Congress to do its job and determine what measures it believes are necessary and appropriate.”
President Donald Trump announced the previous moratorium extension on Aug. 8, and since then, numerous student loan borrowers have awaited a continued extension amid the worsening pandemic.
About 44.7 million U.S. residents owed a collective $1.5 trillion in student loan debt last year, according to the U.S. House of Representatives Committee on Financial Services. DeVos extended the federal student loan moratorium more than a month after 77 consumer, civil rights, labor, and student advocacy organizations signed a joint letter calling for the extension.
The organizations sought the extension with urgency, noting that borrowers nationwide — particularly people of color — are disproportionately impacted by the financial stresses of the COVID-19 crisis. They also showed concern that if the extension stayed unresolved by Nov. 15, it would be difficult for borrowers to plan for the holidays and beyond.
“Borrowers will find it harder than ever to make ends meet as they are thrown back into repayment or forced collections while the economy continues to suffer,” the 77 organizations stated in the letter. “Waiting to address the cliff will cause unnecessary stress, confusion, and errors for borrowers, servicers, and collectors alike.”
Defaulting — failing to pay these loans for at least 270 days — can create a host of serious issues for the borrower. It can result in plummeting credit scores, the loss of benefits such as federal student aid, tax refund withholdings and garnished wages — when employers are forced to withhold an employee’s wages to send it to the loan-holder, according to the U.S. Federal Student Aid website.
“We are glad that Secretary DeVos has heeded this call,” stated Alexis Goldstein, a senior policy analyst at the nonprofit coalition Americans for Financial Reform, one of the 77 groups that signed the October letter. “This extension means that millions of borrowers have an additional month of both certainty and breathing room.”
