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U.S. extends student-debt pause

Move made at Biden request; break lasts through September by DANIELLE DOUGLAS-GABRIEL THE WASHINGTON POST | January 22, 2021 at 4:10 a.m.

WASHINGTON -- After a request from President Joe Biden, the Education Department said Wednesday that it would extend the suspension of federal student loan payments through Sept. 30.

The move arrives days before the moratorium is set to expire at the end of this month. It makes good on Biden's pledge to give borrowers some breathing room as the economy struggles to find its footing.

"Too many Americans are struggling to pay for basic necessities and to provide for their families," the Education Department said in a statement Wednesday. "They should not be forced to choose between paying their student loans and putting food on the table.

In the statement, the acting secretary of education said the agency would extend the pause on federal student loan payments and collections and keep the interest rate at 0%.

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Biden's request for the extension was part of a series of actions he took on his first day as president.

To that end, consumer advocates and liberal lawmakers had hoped Biden would use executive authority to cancel some portion of the $1.6 trillion in outstanding student debt. Brian Deese, the incoming director of the National Economic Council, said the administration supports forgiving up to $10,000 in debt per person through congressional action.

The Democrat-controlled House passed legislation last year affording cancellation to borrowers through a stimulus package shelved by then-Senate Majority Leader Mitch McConnell, R-Ky.

Sen. Charles Schumer, D-N.Y., the incoming majority leader, has been unwavering in his support for debt cancellation and could clear a path forward. That would be a formidable challenge given the slim majority Democrats will have in the Senate, but advocates say it's not impossible.

In the meantime, about 41 million Americans will continue to benefit from the federal government's pause of student loan payments.

While the federal government continues to pause the collection of defaulted student loans during the coronavirus pandemic, private education lenders and creditors have resumed filing new lawsuits and continuing existing cases to recover past-due debts, according to court records.

Many companies had vowed to halt collections litigation as Americans faced layoffs and wage reductions in the beginning of the health crisis.

But despite tens of thousands of people still losing their jobs, student-loan companies are again seeking payment. Attorneys for some of the largest private education debt creditors have filed dozens of lawsuits in several states since at least the summer.

Private companies don't have the power of the federal government to seize tax refunds, wages and Social Security benefits to repay defaulted debt. Instead, they must file a lawsuit and get a court judgment. Lenders and creditors, if successful in court, can then garnish a person's wages or seize their assets.

In mid-March, Navient stopped taking legal action against private student loan borrowers in light of the pandemic. But by August, default judgment and wage garnishment orders emerged in a handful of cases that remained on the docket.

Navient spokesman Paul Hartwick said those orders were filed before the pandemic and recently approved by judges. The company, he said, has not filed any actions to seek enforcement and is not planning to in the near-term.

"A small number of preexisting cases may have remained on dockets after March 25, but we have not filed any new suits or actions since then and are not currently doing so," Hartwick said.

One of the nation's largest holders of private education debt, National Collegiate Student Loan Trusts, has been active in the courts since the summer. Transworld Systems, which oversees debt collection for the trusts, said in April that it would be pulling lawsuits in the pipeline and would stop entering default judgments against borrowers for at least two months.

Lawyers for the trusts have recently filed dozens of cases against borrowers in New Jersey, California, Maryland and New York. In Maryland alone, the trusts have filed at least 67 new cases since July, according to court records and a recent report from the Student Borrower Protection Center. The advocacy group found most of those cases were filed against people in majority-minority communities in Prince George's and Baltimore counties.

Transworld did not immediately respond to requests for comment.

Information for this article was contributed by Laura Meckler of The Washington Post.

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