Student loan administrators said not to contact borrowers as the payment pause deadline nears

WASHINGTON — A little over a month before the student debt moratorium is due to end, the federal government has told loan servicers not to contact borrowers about resuming payments, a representative for the trade group said Monday.

The Department of Education has told loan servicers not to approach borrowers for “the last few weeks,” said Scott Buchanan, chief executive of the Student Loan Servicing Alliance, which represents all companies servicing the federal loan issue, on the administration’s moratorium.

NBC News has reached out to the Department of Education for comment.

The Wall Street Journal first reported on Monday that credit servicers were ordered not to contact borrowers.

President Joe Biden in April extended the pause on federal loan repayments until August 31, saying the nation is still recovering from the coronavirus pandemic.

A White House official said Monday night that “no decision has been made” on whether to extend it again. The official said Biden will make a decision before Aug. 31.

Federal student loan repayments were first suspended more than two years ago as the pandemic took hold.

The pause began in March 2020 when then-President Donald Trump signed the CARES Act into law, halting payments until September 2020 and freezing interest accumulation. Trump later took executive action to extend the grace period to January 2021.

Biden has extended the moratorium multiple times – starting on his first day in office and most recently in April. The moratorium does not apply to borrowers with privately held loans.

Buchanan said his group had previously warned the government of problems that could arise from resuming payments.

“We needed to know two months ago, but really, we’re here in the Rubicon. If we get into August and we don’t have guidance on how to do that, we’re really creating an untenable position for us and for borrowers,” Buchanan said.

“We can’t exchange a dime. And I think that’s something they don’t really appreciate,” he added.

Resuming payments would come at a high political cost for Biden and congressional Democrats, who are pushing to strengthen their base ahead of the midterm elections.

A source familiar with the matter said an extension of the repayment pause was likely. “I just don’t understand how they don’t,” the source said.

“While they can theoretically wait until the 31st, in fact if they do, they’re delaying it,” the source added, citing the operational challenges of restarting the program.

It’s unclear if Biden plans to take action to cancel student debt. Many progressives have advocated scrapping all loan balances, and some Democrats said the president should call up to $50,000 per borrower.

The White House has hinted in the past that Biden is willing to cancel $10,000 for borrowers below a certain income, but nothing has been announced.

Phil Helsel contributed. Student loan administrators said not to contact borrowers as the payment pause deadline nears

Fry Electronics Team

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