The biggest takeaway from President Joe Biden’s surprise decision to extend student loan relief for another 90 days isn’t necessarily what you think. Yes, through May 1, 2022, student loan borrowers won’t have to make any federal student loan payments. Yes, student loan borrowers won’t have any new interest accrue on their federal student loans. Yes, there’s won’t be any collection of student loans in default through garnishment of wages or Social Security checks. However, there’s another huge benefit for student loan borrowers that is less visible. Let’s explore.
Student loan relief due to the Covid-19 pandemic, which Congress first passed in March 2020 through the Cares Act stimulus package, has another hidden benefit for more than 40 million student loan borrowers: student loan cancellation.
With the extension of student loan relief, federal student loans won’t have any new interest accrue. The U.S. Department of Education estimates that student loan borrowers collectively will save $5 billion a month in interest costs. With a three-month postpone of the student loan payment pause, that equates to $15 billion of total student loan cancellation. This is in addition to $110 billion of student loan cancellation that student loan borrowers will have received from March 2020 through January 31, 2022, the latter of which was the date that Biden’s second extension of student loan relief was scheduled to end.