Why Federal Student Loan Payments Probably Won’t Restart This May

After more than a two-year pause on federal student loan repayments, the moratorium—which former President Donald Trump signed into law in March 2020 and has been extended several times—is slated to expire on May 1. If that happens, federal student-loan borrowers will have to resume repayments. Or maybe they won’t.

In early March, Department of Education officials instructed the companies that service federal student loans not to send notices to borrowers that their payments would resume in May, Politico first reported. Because the Department is required to communicate with borrowers at least six times before payment obligations resume, according to NPR, Democratic congressional aides say this notice to loan servicing companies was likely the Administration’s way of signaling another extension.

Around the same time, President Joe Biden’s chief of staff, Ron Klain, indicated on a podcast that Biden was considering whether to use his executive authority to issue some federal student loan forgiveness “before the pause expires, or he’ll extend the pause.” (The White House did not respond to TIME’s request for comment on the status of Biden’s decision.)

Lawmakers who have long advocated for student loan reform see this latest extension as an opportunity to secure a longer-term solution, several Democratic Congressional aides say. “We can’t keep extending,” says one Senate Democratic aide, “without fixing things.”

Sen. Patty Murray, a Washington Democrat and chair of the Senate Health, Education, Labor, and Pensions Committee, is leading the fight in Congress. She is pushing the Biden Administration to use the time afforded by one more forbearance period extension to place borrowers who were in default before the moratorium began back in good standing. She has also pushed the Administration to replace existing income-driven student loan plans with one that is available to all student loan borrowers; to cap monthly student debt obligations at no more than 10% of discretionary income; and to bolster the Public Service Loan Forgiveness (PSLF) program, which provides conditional loan forgiveness to those who work for non-profits or federal, state, and local governments, like public school teachers and police officers.

The Department of Education’s draft proposal, the “Expanded Income-Contingent Repayment” program, which it published in November 2021, might be a starting point, though Murray’s plan goes further. The proposed text appears to seek building on existing student loan programs that allow eligible borrowers to repay loans on schedules and in amounts based on their incomes and levels of education.

Because these changes could all be accomplished through the regulatory rule-making process, according to one legislative aide, rather than through Congress, Biden would not need the approval of any Congressional Republicans to carry out Murray’s plans. “I’ve been very clear to the administration, to the Department of Education,” Murray said during a Wednesday roundtable, “that we need to put a pause on all of this until at least 2023, until we actually fix the student loan issues that are in front of us.”

A broadly popular proposal

The Biden Administration’s next steps will affect the finances of some 37 million federal student-loan borrowers, for which payments average $393 per month. Survey results published by UnidosUS, the Student Borrower Protection Center, and Data for Progress on March 24 found that 59% of likely voters who have student loans expect major changes to their finances when the forbearance period is scheduled to end, while just 31% do not expect having to make significant spending adjustments. Another 10% were unsure of how it will impact them.

Read more: How Record-Setting Inflation Could Hurt Democrats in the Midterms

Democrats may also have the November midterm elections in mind. Pollsters predict that Democrats face an uphill battle in maintaining their narrow majorities in the House and Senate, and voters might look favorably on extended relief for student borrowers. Roughly 70% of voters supported continuing the moratorium as of December, according to a Data for Progress survey. Among Democrats, 88% supported it, while 71% of independents and 48% of Republicans felt the same.

“Ending the pause on student loan payments is a thing that a relatively small minority of voters support,” says Mike Pierce, executive director of the Student Borrower Protection Center, a nonprofit that advocates on behalf of student loan recipients. “It feels like the people that are pushing the president to go that route are his political opponents. So it’s hard to infer anything other than this is just people playing politics and trying to score points.”

More from TIME

Politics might also be part of the reason Republicans lawmakers, including Republican Senator Richard Burr and GOP Representative Virginia Foxx, both of North Carolina, are eager for the forbearance period to end, despite the fact that it originated in the Trump Administration and its existence is widely popular among voters of all political affiliations. “The Biden administration owes Congress and the American people a plan that will address challenges facing student loan servicing companies and borrower confusion, and provide a clear timeline for when student loan payments will resume,” Foxx said in a January statement. “The Biden administration has had a year to come up with a plan, it is time to stop stalling.”

Progressives, meanwhile, continue to push for the cancellation of tens of thousands of dollars of federal student loans via executive action. Senate Majority Leader Chuck Schumer, Sen. Elizabeth Warren of Massachusetts and Rep. Ayanna Pressley of Massachusetts, wrote a letter to Biden in December asking him to forgive up to $50,000 in federal student loans. While Biden has, so far, resisted the idea, he has urged Congress to pass a bill forgiving up to $10,000.

Loan companies want loan payments to restart

It’s not just Republicans who want the forbearance period to end, though. Banks and private loan companies, which make money when people refinance their federal student loans into private ones in order to secure interest rates or repayment plans that work better for them, do too. Because federal student loan interest rates were set at 0% and payments were paused during the forbearance period, fewer people converted their federal loans to private ones.

Some of the lenders that would normally make more money off the conversion of federal student loans to private ones increased the amount they spent on lobbying Congress compared to pre-pandemic years. SoFi Technologies, for example, spent $460,000 on lobbying in 2021, according to government accountability watchdog Open Secrets, versus $220,000 in 2018 and $160,000 in 2020.

“Right now, there’s really no incentive for borrowers to refinance,” says a Democratic House aide. “Small and large banks are pissed about it.”

Ending the forbearance period now would please the private lenders, but it would come at the expense of borrowers with debt in more than one way. Three of the largest companies that previously serviced federal loans, including Navient and Granite State, stopped doing so in 2021. That meant that borrowers who had loans serviced through those companies saw their balances transferred to new companies, whether they liked it or not. It wasn’t seamless. Amid the moratorium, Pierce says some borrowers have been sent bills when no payments are due, have been given incorrect information about the state of the payment pause, and have had difficulty accessing their student loan information when trying to log in to the portal of the new company where their loans were transferred. “If the system can’t handle a transfer like this when no one has to pay the bills,” says Pierce, “what does it mean when 35 million people have bills to pay?”

One Senate aide argues the solution to these problems is clear. “Before we resume payments,” she says, “we need to make sure that they’re resuming payments in a system that works.”

Correction, March 29:
The original version of this story implied that Sallie Mae refinances federal student loans. It offers private student loans, but does not refinance federal ones.