Biden should pause interest on student-loans even after payments resume in February, 14 senators say

• A group of Democratic senators called on Biden to waive interest on student-loans next year.
• Student-loan payments, and interest, are scheduled to resume on Feb. 1 after a nearly 2-year pause.

Interest rates on student loans can cause borrowers' debt loads to skyrocket, leaving many people with a balance that's higher than the amount they initially borrowed.

That's why a group of Democrats don't want interest to be a part of the resumption of student-loan payments on February 1.

On Monday, 14 Democratic senators, including Georgia Sen. Raphael Warnock and Oregon Sen. Ron Wyden, sent a letter to President Joe Biden requesting he continue to waive interest on federal student loans for the duration of the pandemic, even after payment collection resumes. The lawmakers said Biden can use his authority under the HEROES Act of 2003, which they wrote would ensure borrowers "are not placed in a worse position financially as a result of the national emergency."

"While borrowers will begin making payments again soon, many are still dealing with financial challenges as our nation works to build back better from the COVID19 pandemic," the letter said. "Accumulating student loan interest can be a daunting challenge for borrowers with the lowest incomes or the heaviest student debt burdens."

The senators also requested that Biden give the approximately 7.5 million student-loan borrowers in default a "fresh start" to prevent them from falling either further behind on their debt, which could cause wage garnishment and seizure of federal benefits, like the child tax credit.

According to the Education Department, the waiver on student-loan interest saved federal borrowers an additional $5 billion each month, and continuing that relief even after payments resume will not only help both borrowers and the department easier facilitate the transition back into repayment, but it will ensure borrowers won't be in an even greater financial bind due to high interest rates, the lawmakers wrote.

As Insider previously reported, many borrowers would likely be debt-free right now if interest on their loans didn't keep growing.

"I have gotten screwed with interest so hard that I've paid the majority of my loan back, but yet, the banks are the ones profiting, not me," one borrower previously told Insider. "I fear it's a never-ending cycle where I can't give my daughter the life I want to give her and I can't give myself the life I want to give myself."

Congress sets the interest rates on student-loans each year, but the rate applies to the year the loan was taken out. So even if the current interest rate is lower than a rate implemented a decade ago, if a borrower took out a loan a decade ago, they have to continue paying their debt with that higher rate.

The lawmakers' letter comes as millions of borrowers are preparing to resume student-loan payments in two months after what will be a nearly two-year pause. Given that it appears unlikely Biden will cancel student debt before payments resume, advocates and Democrats are calling on the president to continue pandemic relief measures since COVID-19 cases are ongoing.

On Monday, for example, Senate Majority Leader Chuck Schumer called on Biden to extend the payment pause past February 1, given new uncertainty with Omicron.

"This debt is just overwhelming for people," Schumer said. "If we don't extend the pause, interest rates just pile up. Students owe a fortune. And with omicron here, we're not getting out of this as quickly as we'd like."