“We’re monitoring how borrowers are doing very, very carefully,” said James Kvaal, who’s in charge of the Education Department’s restart of student loan payments.
What sets the student loan resumption apart from those other economic events is that every step of it is being managed — in excruciating detail — directly by the Biden administration. And White House and Education Department officials have for months, if not years, been preparing in some way to unfreeze the student loan system and ease Americans back into repaying their debt.
Administration officials have for months internally modeled various potential outcomes. They’ve also tried to soften the blow of payments restarting by promoting a new repayment plan that lowers monthly payments for most borrowers and caps interest. And the Education Department has also announced a 12-month “on-ramp” forbearance period where borrowers won’t be reported as delinquent to credit bureaus if they fail to make payments.
“It’s hard to make projections because I’m not aware of anything like a three-and-a-half year pause on payments, and then payments then resuming in the private sector or the public sector,” Kvaal said in an interview. “It’s a little difficult to know what will happen.” The department has not released the aggregate amount of the monthly payments that borrowers are now facing. But before the pandemic, the federal government typically collected roughly $70 billion from borrowers each year, which would average out to about $5.8 billion each month.