US Student Loan Payment Pause Extended; England Graduates Facing 12% Interest Rate

The Biden administration formally announced a new extension on monthly loan payments and interest, delaying the deadline to August 31.

Since the pandemic began in 2020, the US Department of Education has extended the payment moratorium on federal student loans for the sixth time, NBC News reported.

The White House also announced measures to clear the arrears of millions of student loan borrowers who had fallen behind before the COVID-19 pandemic giving them a "fresh start."

Even though the economy has improved since the freeze on federal student loan bills was announced in March 2020, President Joe Biden has remarked that it is still too early to urge debtors to resume payments.

In a statement announcing the latest extension dated April 6, Biden said that all Americans are "still recovering from the pandemic and the unprecedented economic disruption it caused."

Providing a Breathing Room for Students With Debts

The latest postponement occurs as the White House continues to deliberate on student loan forgiveness.

Biden is under intense pressure to minimize some of the $1.7 trillion in outstanding education debt in the United States. Senators Chuck Schumer of New York and Elizabeth Warren of Massachusetts urge him to cancel the $50,000 per borrower cap.

According to Politico, White House Press Secretary Jen Psaki told Fox News that she believes student loan borrowers will have to begin paying their debt at some point during the current administration. But the assessment will be done monthly considering the COVID-19 situation as well as "economic data."

She echoed President Biden's sentiments of providing Americans "some breathing room."

England Students Face 'Brutal' Loan Interest

Meanwhile, according to the Institute for Fiscal Studies (IFS), students and graduates in England will pay up to 12% interest on their loans this autumn.

The rate will drop in March 2023, when the interest rate will be capped.

According to the IFS, per BBC news report, interest rates will be like a roller-coaster ride soon, but the long-term impact on repayments will be minimal.

The rate will be set at a lower level for students entering degree programs from 2023.

For individuals currently enrolled in university in England, the interest rate on loan is computed by adding 3% to the retail price index (RPI) measure of inflation.

This is based on changes in a variety of costs, such as housing, throughout time.

Following graduation, the interest rate is tied to pay, so individuals earning £27,295 or less are charged RPI. However, they do not have to pay until they earn more than that amount yearly. Graduates who earn more money each year are charged RPI+3%.

The RPI number, which was validated on Wednesday, determines the interest rate for the next academic year, which will jump from 4.5% this year to 12% in September 2022.

This is the highest rate since England's university tuition fees were hiked to £9,000 in 2012.

Hillary Gyebi-Ababio, from the National Union of Students, calls the increased rate "brutal." She said that the 12% hike will deter thousands of students from enrolling in a university and prompt "uncertainty for the millions of graduates already repaying their loans, with thousands of pounds added to their debt sheet."