We applaud President Biden for acting swiftly on his first day in office. Struggling student loan borrowers no longer need to worry about resuming monthly payments.
The President’s directive to extend the existing student loan payments suspension with no accrual of interests was necessary. It provides critical relief to over 40 million federal loan borrowers.
Regrettably, this policy still excludes some 8 million borrowers who have private student debt (or federally backed student loan debt that’s held by a private lender).
While some private lenders have provided some relief, the unpredictability inflicted on these borrowers is grave. Too many are left with no choice but to repay their debt at the expense of basic necessities like food or housing.
A uniform relief for private student loan borrowers is urgently needed, as the economic impact of the pandemic is increasing the financial vulnerability of too many households.
It’s also imperative that we turn our attention to October 1st when student debt repayments resume.
How can we ensure that borrowers, whose economic situation will have drastically changed due to layoffs or smaller paychecks, have monthly repayment amounts that they can afford?
An immediate and practical solution would be to give borrowers access to a streamlined process enabling them to enroll in income-based repayment plans in a timely manner.
Currently, loan servicers are asking borrowers to wait for the end of the suspension period to adjust their repayment plans. This will lead to gridlock and important delays in October.
Borrowers should be able to lower monthly payments to reflect their ability to pay with those living in poverty having access to zero monthly repayments as soon as the repayment resume.
Another critical part of the solution is widespread student debt cancellation. It’s critical that the new administration encourages Congress to pass legislation that truly relieves struggling borrowers.
All borrowers, public or private student debt holders, would get included.
Studies show that those with lower economic status hold the lion’s share of outstanding student debt. The more student debt cancellation we see, the more we reduce racial wealth inequality.
There have never been so many good reasons to cancel student debt.
We must seize this opportunity to tackle racial inequalities and wealth disparities.