WASHINGTON — Just over a month before the student loan moratorium ends, the federal government has told loan managers not to contact borrowers about resuming payments, a trade group official said Monday.
The Department of Education has told loan managers not to contact borrowers in recent weeks, said Scott Buchanan, the executive director of the Student Loan Servicing Alliance, which represents all companies providing the federal loans. until the government’s moratorium.
NBC News has asked the Department of Education for comment.
The Wall Street Journal first reported Monday that loan managers have been told not to contact borrowers.
In April, President Joe Biden extended the pause on repaying federal loans to August 31, saying the nation was still recovering from the coronavirus pandemic.
A White House official said Monday night that “no decision has been made” on whether or not to renew. The official said Biden will make a decision before August 31.
Federal student loan repayments were first interrupted more than two years ago when the pandemic broke out.
The pause began in March 2020, when then-President Donald Trump signed the CARES Act, which halted payments until September 2020 and froze interest accumulation. Trump later took executive action to extend the postponement until January 2021.
Biden has repeatedly extended the moratorium — starting on his first day in office and most recently in April. The moratorium does not apply to borrowers with private loans.
Buchanan said his group has previously warned the government about problems that could arise from resuming payments.
“We should have known two months ago, but really, we’re here in the Rubicon. If we come in August and don’t have guidance, I mean we’re really creating an unsustainable position for us and for borrowers,” Buchanan said.
“We can’t turn 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 bases ahead of the midterm elections.
A source familiar with the matter said an extension of the refund break is likely. “I just don’t understand how they don’t,” the source said.
“While they could theoretically wait until the 31st, if they do, they will de facto delay it,” the source added, citing the operational challenges of restarting the program.
It is unclear whether Biden plans to take action against student debt forgiveness. Many progressives have argued for eliminating all loan balances, with some Democrats saying the president must cancel up to $50,000 per borrower.
The White House has indicated in the past that Biden was open to canceling $10,000 for borrowers of certain incomes, but nothing has been announced.
Phil Helsel contributed.