WASHINGTON — The Biden administration announced Wednesday that the moratorium on federal student loan payments would be extended through May 1, as the highly transmissible omicron variant of the coronavirus poses a new threat to the economy.
In a statement, President Joe Biden said that “millions of student loan borrowers are still coping with the impacts of the pandemic and need some more time before resuming payments.”
The White House for months maintained that Biden would not extend the pause beyond the Jan. 31 deadline, warning borrowers that they should be prepared to resume payments in February even as Covid case numbers increased and as inflation concerns gripped the country.
The administration’s language began to soften in recent days as the omicron variant spread rapidly, with White House press secretary Jen Psaki telling reporters on Tuesday that the president had “not made a decision yet” on whether to issue another extension.
Debt relief advocates and some Democratic lawmakers had pressured Biden to extend the moratorium, especially after Sen. Joe Manchin, D-W.Va., said he would not vote for the president’s Build Back Better Act, throwing its prospects into doubt. The White House has said that the plan would address inflation concerns by lowering costs for items like prescription drugs and child care.
“The Omicron variant is a scary reminder that the pandemic is still a serious concern and Americans cannot be crushed by student debt as they shoulder this health and economic crisis,” said Natalia Abrams, president of the Student Debt Crisis Center.
Some Democrats have also argued that it would be a poor political decision for the president to restart student loan payments — which have been paused for nearly two years — ahead of a difficult midterm elections year.
Rep. Alexandria Ocasio-Cortez, D-N.Y., tweeted last week that it was “delusional” to believe Democrats could get re-elected without acting on student debt relief, among other priorities.
The moratorium began in March 2020, when former President Donald Trump signed into law the CARES Act, which paused payments through Sept. 2020 and eliminated interest rates for the roughly 42 million borrowers.
Trump later took executive action to extend the deferral period through Jan. 2021. Biden, on his first day in office, signed an executive order continuing it through Sept. 30.
The Biden administration in September extended the moratorium again, giving borrowers until Jan. 31 before they would have to resume making payments. The Education Department said at the time that it would be the “final extension” and that it felt that a “definitive end date” would reduce the risk of delinquency and defaults once payments restart.
The moratorium does not apply to borrowers with privately held loans.
The White House has said the Education Department is reviewing Biden’s legal authority to wipe out student debt through executive action, but it has not provided a timeline for the review.
Biden has said that he does not believe he has the authority to cancel student debt unilaterally but that he would support Congress’ passing a bill to cancel $10,000 in debt for each borrower.
The Federal Reserve estimated that in the third quarter of 2021, Americans owed more than $1.7 trillion in student loans. Studies show that students of color are more likely to take on student debt and disproportionately struggle to pay it back. The highest default rates are among students who attended for-profit institutions.