Senate Majority Leader Chuck Schumer and progressive U.S. Sen. Elizabeth Warren warned that the U.S. economic recovery could take a major hit if the Biden administration fails to extend the federal government’s pandemic moratorium on student-loan payments past September.
“Resuming these payments could stall our country’s economic recovery. It could bring millions of loan borrowers to the edge of financial crisis,” Schumer said during a press conference in Washington on Tuesday.
Warren similarly said in a Tuesday subcommittee hearing that “this student-loan time bomb could drag down our entire economy recovery when it explodes.” She said that loan servicers are not prepared to restart payments and have not done adequate outreach to borrowers.
Student-loan debt has almost doubled over the past decade, reaching $1.58 trillion in the first quarter, according to the Federal Reserve Bank of New York, and the payment moratorium has helped people reduce other debt, such as credit-card balances. Ending the pause threatens to be a drag on an otherwise brisk economic rebound.
Senate Democrats, led by Schumer of New York and Warren of Massachusetts, are pressing President Joe Biden’s administration to extend the pause until the spring, and to cancel up to $50,000 in student debt. Warren cited a Pew Charitable Trusts survey showing two-thirds of borrowers saying it would be difficult to afford payments if they resumed the following month.
Some borrowers are unaware that payments are resuming at all, said Persis Yu, director of National Consumer Law Center’s Student Loan Borrower Assistance Project, at the hearing. Others are unsure of their payment amounts.
Adding to the challenge, about 10 million borrowers will need to transition to a new loan servicer in the coming months as two federal servicers — Granite State Management and Resources and the Pennsylvania Higher Education Assistance Authority — will not be renewing their contracts when they expire in December.
Schumer spoke on the Senate floor shortly before the press briefing, saying, “With the flick of a pen, President Biden could give a fresh start to tens of millions of borrowers drowning in debt.”
White House press secretary Jen Psaki said at a briefing this month that she had nothing to announce on extending the payment pause and that she wanted to give the president the “space to make a decision.”
Story by Peyton Forte and Laura Litvan.