Student-loan payments resume in 2 months after what will be a nearly 2-year pandemic pause.
While some borrowers are better off due to targeted student-debt cancellation, most are not.
Advocates worry that most borrowers are not financially-secure enough to enter repayment.
The pandemic may not be over, but in two months, the pause on student-loan payments will be. About 580,000 borrowers will be free of that burden forever, thanks to President Joe Biden's targeted loan forgiveness.
Federal Student Aid director Richard Cordray said during remarks this week that while the nearly 2-year pause has been "welcome relief, no doubt," January 31, 2022 is the last day borrowers will be experiencing that relief.
"We recognize that the stakes are extremely high as we face this challenge," Cordray added.
Transitioning 43 million borrowers back into repayment — along with the 16 million borrowers who will make payments to new lenders — is an unprecedented task with many potential hurdles. An Education Department spokesperson previously told Insider the department "will continue to work to ensure that all of our borrowers can experience a successful return to repayment."
Student loan payments have been on pause — and not collected interest — since March 2020.
Since President Joe Biden took office in January 2021, he has extended the student-loan moratorium twice. But his Education Department made clear in August that there would be no more extensions past February, meaning borrowers will have to face their student-debt loads next year whether they're ready or not.
Biden's administration remains firm that 43 million Americans will experience a smooth transition back into paying off their student debt. But some borrowers, experts, and lawmakers aren't so sure.
A fraction of federal student-loan borrowers are better off
Not only has Biden extended the student-loan payment pause since he took office — he has also canceled student debt for about 600,000 borrowers.
His Education Department first took action in March for borrowers defrauded by for-profit schools, and to date it has canceled over $2.6 billion in student debt for borrowers who went to fraudulent, for-profit institutions like Corinthian Colleges and ITT Technical Institutes.
Borrowers with disabilities have also received over $7 billion in relief. Under President Barack Obama, borrowers with total and permanent disabilities had to submit burdensome paperwork to qualify for loan-forgiveness, causing many borrowers who would be eligible to miss out on the relief. Biden's Education Secretary Miguel Cardona waived that requirement in March and canceled student debt for nearly 400,000 of those borrowers.
And most recently, the department announced reforms to the Public Service Loan Forgiveness (PSLF) program, which forgives student debt for public servants, like teachers, after ten years of qualifying payments. Prior to the reforms, the program ran up a 98% denial rate, and the department said the changes should bring 550,000 borrowers closer to relief.
While those cancellation measures fulfill his campaign promise of reforming broken loan forgiveness programs, which are measures provided within the law, Biden also campaigned on approving $10,000 in student-loan cancellation for every borrower — something he has yet to do.
The majority of borrowers could be facing 'financial disaster'
The pandemic-pause gave some borrowers a debt-free future, but the vast majority of those with federal loans can't say the same. A recent survey from the Student Debt Crisis Center found that 89% of borrowers with full-time jobs don't feel financially-secure enough to resume payments next year, given the large chunk of their incomes that will go toward their student debt.
"When we think about that huge, huge chunk of their income going to student loans at a time when the nation's talking about rising inflation and increased costs, it's a recipe for financial disaster," Student Debt Crisis Center Executive Director Cody Hounanian told Insider.
Borrowers feel the same. Reid Clark, a single father with $550,000 in student loans for his kids, previously told Insider he does not feel confident about his ability to pay off his debt.
"I am highly concerned about my ability to pay back the loans during my remaining working years, and it's going to scare me even more in a few years when I retire and I go on to a very limited income," Clark said. "That's the part that gives me the most anxiety."
The solution lawmakers like Massachusetts Elizabeth Warren see to combat those fears is broad student-debt cancellation.
"Cancelling $50,000 of student debt would address this issue by relieving the student debt burden entirely for the vast majority borrowers," she previously said.
Do you have a story to share about student debt? Reach out to Ayelet Sheffey at email@example.com.
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