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Chris Quintana, USA TODAY

President Joe Biden will extend the student loan freeze through Aug. 31, but the news is likely to bring little satisfaction to borrowers seeking long term relief.

President Joe Biden signs an executive order on immigration, in the Oval Office of the White House, Tuesday, Feb. 2, 2021, in Washington. (AP Photo/Evan Vucci)

The president didn’t mention widespread cancellation, which has kept borrowers on edge since March 2020 when the freeze began under former President Donald Trump.

Meanwhile, Democrats are pushing for more aggressive forgiveness while Republicans are pressuring the president to resume payments.

In a Wednesday statement, Biden said data from the Federal Reserve suggested that if payments restarted in May that, “millions of student loan borrowers would face significant economic hardship, and delinquencies and defaults could threaten Americans’ financial stability.” 

“Accordingly, to enable Americans to continue to get back on their feet after two of the hardest years this nation has ever faced,” he said. “My administration is extending the pause on federal student loan repayments through August 31st, 2022.”

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Both Trump and Biden have extended the freeze since its launch at the beginning of the coronavirus pandemic. But this time, borrowers are feeling the economic pinch of rising inflation and steep gas prices tied to the Russian invasion of Ukraine. Meanwhile, the nation’s $1.7 trillion student loan portfolio swells daily.

What does this mean for borrowers?

Borrowers now have until Aug. 31 before payments restart on their federal student loans. The moratorium had been set to expire in May, though the administration had signaled in March an extension was possible.

Borrowers seeking more information about their loans and the pause should visit StudentAid.gov.

Interest on federal student loans will also remain at zero, and collection efforts for past due debts will stay on hold for 41 million Americans with federal student loans. 

The Education Department will allow all borrowers a chance to restart payments without impact from previous penalties from overdue payments, according to a news release.

“The Department of Education is committed to ensuring that student loan borrowers have a smooth transition back to repayment,” said U.S. Secretary of Education Miguel Cardona. “This additional extension will allow borrowers to gain more financial security as the economy continues to improve and as the nation continues to recover from the COVID-19 pandemic.”

The agency also said it would continue providing relief to borrowers whose universities defrauded them. It also said it would streamline the Public Service Loan Forgiveness program, a government initiative meant to offer debt relief to those working in the public sector.

The agency announced an overhaul of the program in October that has already resulted in identifying more than 100,000 borrowers eligible for roughly $6.4 billion in relief, according to the Education Department.

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