Will the Student Loan Debt Moratorium Be Extended Again?

It has been two years since the United States Department of Education bestowed a gift onto 37 million student loan borrowers: a moratorium on paying their student loan monthly payments. As you may recall, this decision came as a result of the pandemic. The two years include the original moratorium and several extensions.

The big question pending now is whether President Joe Biden will grant another extension in May. If he does, 37 million Americans will be allowed to live their lives without making their student loan payment. Many student loan borrowers are taking advantage of the no interest and no penalty moratorium and are paying down the principal of their debt. Unfortunately, the overwhelming majority of student loan borrowers are not in a position to begin making their regular monthly payments yet and are using that extra money for normal living expenses like food, rent, gas, healthcare, etc.

One of the problems associated with neither paying the student loans back nor budgeting for that monthly payment is that people learn to live on the income that they have without thinking about how they are going to begin making that payment when it comes due in May. In other words, many people are not in a stable enough financial position to set that money aside each month when the payment doesn’t need to be made. In life, there is always an unintended expense that comes up, and you will need money to cover it

In my opinion, it is highly likely that the President will sign an additional extension to get his party past the midterm elections. I don’t care which side of the aisle your political party sits on, neither want to dump bad news on the public right before an important election. Putting 37 million people or so in a tough financial position right before your party needs their vote is a risky political step to take and could amount to political suicide. Many politicians, regardless of their party, decide to kick the can down the road to avoid upsetting the status quo and instead paint a less-than-accurate rosy picture for the public rather. Let’s face it, being truthful and honest never won an election, and being truthful and honest about $1.8 trillion of student loan debt isn’t going to make anyone happy.

Since the moratorium, the student loan borrowers who haven’t been making their monthly payments have saved $200 billion rather than give that money to the Department of Education. How the Department of Education is covering this deficit in cash flow, I do not know. There must be some pretty interesting accounting going on. Or the federal government is printing enough money to keep everything floating along as if nothing is wrong. Either way, you and I both know that we cannot run our businesses like that.

For the student loan borrowers who cannot afford to start making their monthly payments in May 2022, they are probably wishing for an extension of the moratorium. Who can blame them? What happens to them when the government decides to take the gift away? Those individuals need to decide today how they are going to start making those payments when that moratorium runs out because they should know that it can’t last forever. As to those student loan borrowers who were able to continue making payments during the moratorium, good for you. By doing so, you reduced the amount of principal that you owe on the outstanding principal and future interest that you will never have to pay on that part of the debt that no longer exists.

What do you think will happen in May? If you are one of those 37 million individuals who were not able to make payments on your student loan obligations during the past two years and are unsure about how you are going to resume payments, please feel free to reach out to Dellutri Law Group and request a complimentary strategy session with me, Attorney Carmen Dellutri, and my team. We will meet with you and do a comprehensive evaluation of your financial situation and offer you a plan to move forward.