What Biden’s Executive Order on Student Loan Deferments Means for You
In his first week in office, President Joe Biden issued an executive order that extended student loan deferments until Sept. 30. The CARES Act passed last April stopped interest accrual and payment obligations on most federal student loans until Jan. 31. The Biden order gives borrowers another eight months.
If you have qualifying loans, this is good news. Borrowers who are currently unemployed will get a breather, and those who are working can use this as a chance to gain financial ground. They can use the extra money in their budget to pay down other debt, build their emergency funds or meet other goals. They can even pay down their student loans to reduce their obligation when the deferment ends.
These loan deferments have value to the economic stimulus because student loans have been a drag on the middle class for the last decade. U.S. News and World Report has found that the average borrowing of those who use student loans exceeded $30,000 for the class of 2019, an increase of 26% from the class of 2009 over a time period for which the cumulative inflation rate was 19.2%. This obligation keeps people from buying cars, furniture and other basics of middle-class adulthood.
In fact, the popularity and effectiveness of the deferment program could lead to such student-lending reforms as income-based repayment or partial forgiveness. However, borrowers shouldn’t count on that when figuring out what to do during this deferment period.
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