NASFAA, Higher Ed Groups Push for Automatic Forbearance for Student Borrowers During COVID-19 Outbreak

By Joelle Fredman, NASFAA Staff Reporter

NASFAA, alongside the Institute for College Access and Success (TICAS) and the American Council on Education (ACE), sent a letter to congressional leaders Friday urging them to grant student loan borrowers immediate relief from their monthly payments during the COVID-19 outbreak by placing them into automatic, interest-free forbearance.   

Earlier this month, President Donald Trump announced the federal government’s efforts to support student borrowers would be targeted at waiving the interest on federally-held student loans — but on Friday, Education Secretary Betsy DeVos clarified that, in addition to all borrowers with qualifying loans automatically having their interest rate set to 0% for at least 60 days, borrowers would be able to halt payments on their loans for at least two months by requesting an administrative forbearance through their loan servicer. Plus, DeVos debuted a provision to temporarily and automatically suspend the loan payments of those who are more than 31 days delinquent on their loans as of March 13, 2020, or those who become more than one month delinquent.   

In Friday’s letter, the groups urged Speaker of the House Rep. Nancy Pelosi (D-Calif.), Minority Leader Rep. Kevin McCarthy (R-Calif.), Senate Majority Leader Mitch McConnell (R-Ky.), and Senate Minority Leader Chuck Schumer (D-N.Y.) to immediately and automatically place borrowers who are delinquent on their loans into interest-free forbearance to prevent them from defaulting.

“To be clear, there should be a complete moratorium on any loan defaults during this widespread outbreak,” the groups wrote. “Many borrowers will be struggling to meet their day-to-day expenses during this crisis, and they shouldn’t be placed into crippling hardship caused by loan default.”

The groups also urged lawmakers to ensure Congress prohibits all involuntary collections from those borrowers, such as wage and Social Security garnishments, and tax refund offsets.

In addition to protections for delinquent borrowers, the groups said Congress should direct the Department of Education (ED) to pause all federal student loan payments by automatically placing borrowers currently in repayment into interest-free forbearance as well, in an effort to allow families to keep limited funds in their pockets. The groups added that months of paused payments should still continue to count toward loan forgiveness for both income-driven repayment (IDR) plans and Public Service Loan Forgiveness (PSLF), which does not appear to be the case with Trump’s proposal. 

“This should be done in a way that ensures a smooth re-entry into repayment for borrowers when the crisis has abated and the time to resume payments begins,” the groups added. 

By establishing an opt-out forbearance policy for borrowers who wish to continue making their payments, the groups wrote, Congress can ensure those struggling to make ends meet during this time will not need to take additional action to receive relief. Under Trump’s proposal, borrowers must request to be placed into forbearance from their servicer, provided they have not defaulted on their loans. 

Senate Republicans and Democrats also introduced their own COVID-19 stimulus packages this week. While Republicans proposed hatling student loan payments and interest accrual for six months, Democrats went further as to push for canceling the payments of all federal borrowers for the duration of the national emergency, and ensuring each borrower receives total debt relief of no less than $10,000 following a 90-day grace period at the program's conclusion.  

NASFAA created a web center to keep members and the financial aid community updated on pertinent news related to the coronavirus, and is hosting a free, follow-up webinar April 2 to review more n questions related to Title IV and COVID-19. Stay tuned to Today’s News and NASFAA’s AskRegs for more news.


Publication Date: 3/23/2020

Douglas A | 3/25/2020 4:22:28 PM

Some lenders are arguing that this act does not apply to some federal loans. They are withholding this forbearance option from borrowers who have federal loans "held" by the lender. Shouldn't this apply to all borrowers who have federal loans?

Sarah B | 3/24/2020 10:30:47 AM

My reading of DeVos' clarification seemed to apply only to Direct Loans potentially excluding FFEL or Perkins Loans. Has this been further clarified?

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