White House to Extend Student Loan Payment Moratorium Until September

The White House is expected to announce as soon as today that it will once again extend the moratorium on student loan payments, this time pushing the deadline out another four months to August 31. This will mark the sixth time since the start of the COVID-19 pandemic that the federal government has opted to allow individuals with student loans to not make their loan payments.

For companies in the accounts receivable management industry, this means that consumers are likely to have extra disposable income that would have gone toward making their student loan payments, which were set to resume at the end of this month. But for companies collecting on student loans, it means another four months with nothing to collect. Servicers and collectors had been ramping up their operations — including hiring additional staff — in anticipation of resuming collections at the end of this month.

Interestingly enough, the moratorium is set to end on August 31, about two months before the mid-term elections, which could turn student loans and restarting the collection of payments into a hot-button topic during campaign season.

“There’s obviously a huge amount of pressure, including from the Senate majority leader, to just cancel student loans,” said Lanae Erickson, senior vice president at Third Way, a think tank, in a published report. “The payment pause has just become inextricably linked with the canceling student loan conversation and makes it all the more politically dicey for the administration.”

The moratorium has paused student loan payments for 35 million individuals, including 7 million who are in default and whose loans have not been accruing interest. One concern is that once payments are resumed, many individuals — especially those who suffered financially during the pandemic — would start falling behind on their payments. One estimate projected that serious delinquency rates could quickly rise above historical high-water marks and set new records, according to a published report.

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