BRYAN, Texas — President Biden has been working to lessen or get rid of student loans completely. As the student loan crisis continues on during the pandemic, the administration is passing legislation to lessen that burden.
The CARES Act passed in 2020 put a pause on when people had to pay back their federal student loans. This week, the government extended that pause to more than 1 million borrowers who defaulted on their private student loans. One local expert said this act is also in favor of the lenders.
“A lot of the debt relief that happened during the pandemic was not only by mandate, not just because the CARES Act said all these agencies need to provide that relief, but because individuals lenders decided to provide that relief as private companies," Texas A&M assistant professor of finance Paolina Medina said. "[It's] not because they were required to do so, but because it was in the best interest of their business to do so,"
She said lenders don’t want to see their clients go bankrupt and providing them relief will help lenders get back their money.
“Lenders want you to pay your debts for sure and if there is a temporary situation like a temporary shock, they’re able to fill that gap, they will work with private borrowers to come up with different repayment plans. That certainly has happened during the pandemic in loan,” said Medina.
The payment pause and 0% interest rate now also apply to those 1 million borrowers. They will be able to request a refund for payments they made since the pandemic began.
For some with private student loans, these changes may be hard to keep up with.
“I know at the start of pandemic, a lot of private loan companies they reached out and said you can file a forbearance for some of your loans. But that forbearance only lasted a few months." said Sean Onwualu, who has taken out private students loans in the past. "I remember last March I took one, a few months later I was back to paying it again. Besides that quick pause, I’ve still been paying that loan ever since summer of last year."
While putting a pause on repaying loans may be a temporary breath of relief, it is not a permanent solution to the loan crisis.
“It would help out but to me, all of this is just delaying the inevitable. Yes having a pause in my loans will help me save money in the short term. I could put that money towards things that I need, but at the end of the day, it’s just a pause, that money is still going to come out of my bank account whether that be now or sixth months or whatever,” said Onwualu.
Professor Medina said if you are in a difficult financial situation, reach out to your loan servicer and review the options available.