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Student loans: Biden’s payment pause extension offers ‘long overdue relief,’ expert says

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Student Borrower Protection Center Policy Director and Managing Counsel Persis Yu joins Yahoo Finance Live to discuss the Biden administration extending the pause on federal student loan payments and student debt cancellation.

Video Transcript

AKIKO FUJITA: The Biden administration is extending the pause on federal student loan repayments yet again, this time extending the window to August 31. The president this morning saying in a statement that a restart in May would have caused millions of student loan borrowers to face significant economic hardship and delinquencies and defaults that could threaten America's financial stability. Some, though, asking the White House to do even more to address the looming student debt crisis.

Let's bring in Persis Yu, Student Borrower Protection Center policy director and managing counsel. Persis, it's good to talk to you today. The repayments were set to begin in May. We're talking about an extended three-month window now. How much relief does that bring when you consider the financial hole so many Americans are already in as a result of these student loans?

PERSIS YU: Yeah, so thank you for having me here today. This certainly is long overdue relief. We know student loan borrowers are certainly struggling in this moment, as are many Americans. Right? So payments were set to begin in less than a month. The average student loan borrower has roughly $400 in monthly payments, which, combined with rising prices and inflation, is a price that many Americans said that they could not afford to pay right now.

So this pause is a welcome breath of fresh air for these borrowers, but August is not very far away. And I think it's important to recognize the student loan system has been broken for a very long time. The president should not turn on a broken student loan system. So we are asking the president to provide widespread cancelation. That's one of the first steps in fixing a broken student loan system. We shouldn't be putting people back into debt that they really don't have any great hopes of repaying.

BRIAN CHEUNG: Persis, it's Brian Cheung here. I imagine that you've had some dialogue with those down in Washington, DC about, you know, both the student loan forbearance period, but then also the more permanent fix of forgiving student loans. We know that this was a big campaigning platform for the Biden administration in 2020. Do you feel like the delays that we keep seeing in these forbearance kind of deadlines messages the seriousness by which the Biden administration wants to take on the issue of student loan forbearance?

PERSIS YU: Well, certainly, you know, Biden did, as you mention, he campaigned very hard on student debt as a crisis and promised, you know, in the campaign that he was going to provide widespread cancelation. And a lot of borrowers are waiting for this. You know, these payment extensions, they're important because, you know, borrowers right now cannot afford to make payments. But it does just kick the crisis down-- kick the can down the road, as they say.

And so we do need to see widespread fixes. The administration is actively working on some of those fixes, but we need to see a lot more happen. And so this does set a pretty tight deadline for the president and the administration to get some of those fixes in place, like widespread cancelation.

AKIKO FUJITA: So, Persis, when you say widespread cancelation, I mean, how specifically do you think this should be structured? There's an argument to be said that relief across the board isn't necessarily the right answer, that those who need relief the most should be targeted. But how do you even start to tier that?

PERSIS YU: Yeah, I mean, I think that is really the crux of the problem here, is, how do you identify who needs the relief the most? And one of the things that we know, you know, from decades of the administration of this student loan system is that the-- historically, any attempts to target relief have really fallen down and have failed to get that relief to the borrowers who need it the most. You know, we've seen this through the failures of income during payment.

Just last week, we saw a report that showed that some of the servicers weren't even counting, you know, the payments of borrowers who had made payments or qualified for $0 payments, which means that the lowest income borrowers are missing out on that relief. We've seen that through public service loan forgiveness, through the disability discharge programs. Targeted relief isn't working. The way that we ensure that borrowers who need help get it is by making sure that everyone gets it, and that they get it as automatically and seamlessly as possible.

BRIAN CHEUNG: And then Persis, lastly here, I want to ask just about the other looming issue, which is the cost of tuition itself. Even if you were to cancel student debt, these are sky high prices that both public and private universities in this country are charging. How does your organization kind of approach that for the future generations of students who have not enrolled in college yet?

PERSIS YU: Yeah, I mean, so I think what we need to do is we need to look at this crisis and we need to learn from it, right? Student debt is not working as a way to finance higher education. Certainly, I think these conversations need to happen in parallel, right? That there is an issue of folks who have existing student loan debt and folks that-- of preventing other folks from getting it.

And I think the big lesson that we need to take away from this is that as a society, as a country, we need to move away from debt financed education, and then we need to ensure that there are 43 million borrowers who have student loan debt presently. And so we need to make sure that we're getting relief to those borrowers, so that they can move forward and contribute to the economy.

BRIAN CHEUNG: Persis Yu, Student Borrower Protection Center policy director and managing counsel, thanks so much for stopping by Yahoo Finance this morning.