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Financial Planning > College Planning > Student Loan Debt

Biden Extends Student Loan Payment Halt, Orders Rethink of ESG Rule

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On the first day of his administration, President Joe Biden pledged “to take a historic number of actions to deliver immediate relief for families across America,” including two that could affect the clients of financial advisors: extending the moratorium on federal student loan payments through September and a review of the Labor Department’s regulation limiting the use of ESG-focused investments in defined contribution retirement plans.

A fact sheet listing Biden’s “Day One Executive Actions” says Biden will ask the Department of Education “to consider immediately extending the pause on interest and principal payments for direct federal loans until at least September 30, 2021.”

Biden’s pick for Education secretary is Miguel Cardona, the Connecticut education commissioner, who has yet to be confirmed.

There was no mention in the fact sheet of Biden’s plans to forgive student loan debt, which David Kamin, the incoming deputy director of the National Economic Council, disclosed less than two weeks ago but which will require congressional action. Kamin said Biden supports cancellation of $10,000 worth of student loan debt.

According to the Federal Reserve Bank of New York, student loan debt totaled $1.55 trillion in the third quarter, a $9 billion increase from the second quarter. Slightly more than 90% of that debt is in federal student loans.

Labor’s ESG Rule

Biden’s executive actions list also included a directive to “all executive departments and agencies to immediately review and take appropriate action to address federal regulations …. taken during the last four years that were harmful to public health, damaging to the environment, unsupported by the best available science, or otherwise not in the national interest.”

Among them are the Labor Department’s rule limiting environmental, social and governance focused investments in 401(k) plans. Another document provides an extensive list of those regulations to be reviewed. 

The DOL rule limiting ESG investments took effect Jan. 12 despite broad opposition from asset managers, financial industry trade groups and environmentally focused investment groups and sustainable investment advocates. It requires extensive documentation to include ESG investment options in defined contribution retirement plans and prohibits plans from using ESG-oriented target date funds as qualified default investment alternatives. It gives plans until April 30, 2022, to comply with the QDIA restriction.

The final rule doesn’t explicitly ban ESG investment options but allows them only if they satisfy the prudence and loyalty provisions in ERISA and can prove those investments were evaluated based on pecuniary factors.

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