IDAHO — On Wednesday, the Biden administration extended the pause on federal student loan repayments until Aug 31 — adding four months to the pandemic relief measure that started over two years ago.
In a statement, President Joe Biden said the extension allows federal loan borrowers "to get back on their feet" after two years of coronavirus disruption. The U.S. Department of Education added that it would help an estimated 7.5 million Americans who fell behind during the pandemic a 'fresh start' by erasing any overdue loan payments.
"That additional time will assist borrowers in achieving greater financial security and support the Department of Education's efforts to continue improving student loan programs," Biden said.
Interest on student loans will also remain at zero until the August deadline.
Wednesday marked the sixth extension to the pause, which would have ended on May 1. According to the Federal Reserve Bank of New York, the extension impacts more than 43 million Americans, who hold a combined balance of $1.7 trillion in student debt.
Despite having two years to prepare, a recent study by Student Loan Hero found that 72% of federal borrowers aren't ready to resume payments. Student debt and higher education finance expert Amanda Push said that the pandemic has heightened the problem.
"The number jumps even higher, up to 86%, for borrowers whose income was impacted by the pandemic, and quite frankly, still hasn't returned to normal," Push said. "Unfortunately, this is not new. Even before the pandemic, about 39% of borrowers had a lot of trouble being able to afford their student loan debts."
According to the U.S. Department of Education, the average amount of student loan debt for Idaho's 218,100 borrowers is about $33,000.
The average monthly repayment in Idaho is $274, Push said. Based on the current interest rate for student loan repayments (3.73%), it would take about 12 and a half years (151 months) to pay off $33,000 in debt in $274 increments.
"It is almost $300 a month, which is a lot of money for people. They could use that for groceries or other basic necessities they need right now," Push said. "The moratorium is helping borrowers be able to afford those basic needs."
The Student Loan Hero study found that 52% of survey respondents spent their monthly loan payments on essential goods, and 30% used it for outstanding debts.
The report is based on a survey of 1,050 borrowers, U.S. Census and federal data.
"Especially with inflation, prices are going up, and the housing industry has been a big challenge since the pandemic," Push said. "People are still financially reeling from the impact of the pandemic. Their income hasn't recovered."
For more information about student loans and the pause, visit StudentAid.gov.