Student loans are back in focus after the eviction moratorium was suddenly extended.
Here’s what you need to know.
Gone today, back tomorrow. The eviction moratorium — which, due to the Covid-19 pandemic, temporarily prevented landlords from evicting tenants who were past due on rent — expired on July 31, 2021 without any congressional action. With the demise of the federal eviction moratorium, a logical conclusion could be drawn for millions of student loan borrowers who are waiting in limbo: like the eviction moratorium, student loan relief also would expire on September 30, 2021 without any formal extension. The argument goes like this: with the expiration of the eviction moratorium, renters would be left without this federal protection and could lose their home. Similarly, with the scheduled expiration of student loan relief, millions of student loan borrowers will face the following starting on October 1:
- federal student loan payments will resume;
- federal student loan interest rates, which have temporarily been 0%, will return to their regular, pre-pandemic interest rates; and
- collection of student loans in default can resume, which can include garnishment of wages, for example.
As Sen. Elizabeth Warren (D-MA) and others have argued, not extending student loan relief will result in financial calamity, including student loan default and student loan delinquency. Warren also said student loan servicers are not prepared for student loan borrowers to pay student loans again. Warren and others are pushing an extension of student loan relief through at least March 31, 2022. That said, the end of the eviction moratorium appeared to be a warm up of what will happen with student loan relief next month.
Then, the eviction moratorium was suddenly extended — after it expired.
Student Loans: what happened with the eviction moratorium and why is it important
The Centers For Disease Control and Prevention (CDC) instituted the federal eviction moratorium last year, and it was expected to expire on December 31, 2020. However, Congress extended the eviction moratorium through January 31, 2020, and then the CDC extended the eviction moratorium three times thereafter. Like the eviction moratorium, student loan relief was expected to be only temporary. The Cares Act — the $2.2 trillion stimulus package — only authorized temporary student loan forbearance and other student loan relief from March 2020 through September 30, 2020. However, President Donald Trump extended that student loan relief twice: first from September 30, 2020 through December 31, 2020, and then from January 1, 2021 through January 31, 2021. When Biden became president in January, Biden extended this student loan relief eight months through September 30, 2021.
With the expiration of the eviction moratorium approaching on July 31, multiple members in Congress lobbied to extend the eviction moratorium, which they argued would provide an economic lifeline to Americans who are struggling financially due to the Covid-19 pandemic. Members of Congress have argued the same for extending student loan relief. Biden also called on Congress to extend the eviction moratorium, but didn’t do so until three days prior to its expiration. Democrats in Congress scrambled to gather support for the extension, but couldn’t convince moderate and conservative Democrats.
Student loan relief: new hope that student loan payments will be postponed again
What caused the eviction moratorium to be resuscitated? One reason may be prolonged protests from several members of Congress, such as Rep. Cori Bush (D-MO), who continued to pressure the Biden administration to extend the eviction moratorium. Following the expiration on Friday, the CDC extended the moratorium on Tuesday for two months through October 3. The extension will apply only to U.S. counties with substantial or high levels of Covid-19 transmission. The short-term extension is intended to allow more time for renters to get existing financial relief from federal stimulus funds. It’s curious that the CDC extended the eviction moratorium — not on the merits, however — but given that the Biden administration expressed doubt regarding the CDC’s legal ability to extend relief. In June, the U.S. Supreme Court ruled 5-4 not to end the eviction moratorium. However, Justice Brett Kavanaugh wrote a concurring opinion in which he stated that he voted not to end the moratorium because it would expire on July 31. Kavanaugh wrote that Congress would have to pass new legislation to extend the federal eviction moratorium beyond July 31. The CDC did not abide by the Kavanaugh opinion, and proceeded to institute a two-month extension anyhow.
Could the extension of the eviction moratorium provide a kickstarter for an extension of student loan relief? Yes. Like the eviction moratorium, progressive members of Congress may accelerate the political pressure for Biden to extend. If Biden extends student loan relief, here are 5 options. Warren, Senate Majority Leader Chuck Schumer (D-NY) and others have been pressing Biden on student loan relief and student loan cancellation. This win on the eviction moratorium could be an inflection point for progressives to pressure the president to extend student loan relief on the same grounds. However, the eviction moratorium and student loan relief are different in several ways. For example, the eviction moratorium prevents landlords from evicting renters who haven’t paid rent (a financial obligation, but not a loan). Most landlords are individuals or private companies. In contrast, student loan relief is related to repayment of student loans owed to the federal government. Given this difference, it’s possible that the eviction moratorium got extended but student loan relief won’t.
Will Biden extend student loan relief?
This hidden clue suggests that Biden won’t extend student loan relief. The extension of the eviction moratorium could set the stage to change that, however, if there is momentum to continue federal financial support as a result of the Covid-19 pandemic. Unlike the eviction moratorium, Biden has not called on Congress to extend student loan relief beyond September 30. One reason may be that he has executive authority to extend student loan relief and therefore doesn’t need authorization from Congress. For example, he has extended student loan relief once this year. The question is whether he wants to extend the student loan relief, believes it’s necessary in light of the Covid-19 pandemic, and whether he would extend relief. There are also political questions regarding any extension of student loan relief. The Biden administration is battling the Covid-19 pandemic, but also is arguing that the economy recovery is well underway. The rationale to extend student loan relief would be tied specifically to the Covid-19 pandemic, not the general unfairness or high debt burden of student loans. This creates an issue of optics: if student loan relief is extended, it could imply to some observers that the economy is not strong enough to enable millions of student loan borrowers to afford their monthly student loan payments. The counterargument is that the economy and unemployment could still be recovering, but student loan borrowers aren’t prepared to resume student loan payments after an 18-month reprieve. For example, a recent survey showed that 90% of student loan borrowers aren’t prepared to pay their student loans starting October 1. That said “not prepared” could mean not “financially prepared,” but it could also mean not “psychologically prepared,” or both.
Biden could announce an extension of student loan relief, but there is no guarantee. Currently, student loan relief will end on September 30. Make sure you’re prepared for student loan repayment. Evaluate all your options, and make the right financial decision for your unique, personal situation. Here are some popular options to save money with your student loans: