As U.S. Student Loan Pause Set to End, Debtors Seek Cancellation | US student debt
Farzad Kapadia has been paying off his $130,000 in student loans since 2012.
During the pandemic, a pause on federal student loan payments set for March 2020 temporarily lifted the burden on Kapadia, 40, though he continued to make payments on smaller loans from private lenders.
“I can’t describe the relief it gave me. It was life changing,” Kapadia said. “Before the moratorium, I burned every check, I had nothing left at the end of the month. I would go into debt on my credit card.
The break is due to expire on May 1 after two years in place, and Kapadia – who is one of almost 45 million Americans with student debt – said he was “terrified” that payments would start again, especially as inflation had driven up his cost of living. Over the past decade, Kapadia has managed to repay most of her principal loan amount of $80,000, but is still working to pay off the $50,000 in interest accrued on her loan.
“Having a huge portion withdrawn immediately and earmarked for interest payments, although I have repaid the entire principal balance, I find it really usurious and cruel,” Kapadia said.
Kapadia joins hundreds of borrowers who head to Washington DC on April 4 to protest student debt and advocate for Joe Biden’s cancellation of student loans. Among the more than 60 participating organizations are MoveOn, the Working Families party, NextGen America and the Hip Hop Caucus.
Campaigners say the expiration of the loan suspension and the high inflation rate in the economy means that solving the student debt crisis is even more urgent.
The Debt Collective, a borrowers’ union, is organizing the rally and said protesters from across the country will travel to DC for the event. The organization said if Biden allows federal loan payments to restart on May 1, the collective will go on a debt strike once payments resume — a tactic the group has already coordinated.
“There really is no good reason to restart payments, especially when household budgets are already squeezed by the rising cost of living,” said Thomas Gokey, legal and policy director at Debt Collective. “Averaging an extra $400 payment on a student loan to millions of households is really adding a lot of pain when people are already suffering a lot.”
The concern is shared by many with student debt: A investigation of more than 20,000 borrowers by the Student Debt Crisis Center conducted in February found that 92% of fully employed borrowers fear being able to repay their student loans due to inflation.
Along with the general rise in the cost of living affecting borrowers, inflation could affect the interest rates of those who have debt with private lenders. While many federal student loans have fixed interest rates, those with debt from private lenders may be subject to higher interest rates after the Federal Reserve raised interest rates by one year. quarter of a percentage point this month.
While the White House and Department of Education have been mum on any plans to extend the hiatus, Biden chief of staff Ron Klain has suggested the administration consider policies that go beyond an extension of the moratorium.
“The president is going to look at what we should do on student debt before the break expires, or he’ll extend the break,” Klain said. noted in early March, adding that Biden is “the only president in history where no one has paid their student loans for the entirety of his presidency.”
“Whether or not there is executive action on canceling student debt when payments resume is a decision we will make before payments resume,” he said. .
On Thursday, a group of nearly 100 lawmakers sent a letter to Biden urging him to extend the pause on federal student loans until at least the end of the year and eventually work toward debt cancellation. Lawmakers cited Klain’s recent comments as “encouraging for millions of borrowers across the country.”
Supporters noted that momentum around canceling student debt continued to grow as the pause on federal loans, which was first undertaken by Donald Trump’s administration, was renewed in repeatedly, giving borrowers a glimpse of relief.
“We’re getting to a point with the loan breaks that one of the things that [the administration] talks about wanting to have a smooth transition to repayment,” said Natalia Abrams, president and founder of the Student Debt Crisis Center. “We’ve gotten to a point where one of the only ways to do that is to cancel student debt.”
Kapadia said he hoped the administration would consider canceling student debt, “to level the playing field,” but was concerned about how long the White House was taking to act.
“You have people making payments all their adult lives,” he said. “[Biden] has the complete power to do something to dramatically change millions of lives, and he’s sitting on it.