NASFAA joined dozens of other higher education groups in signing on to a letter addressed to House leadership urging Congress to provide more financial relief for student loan borrowers adversely impacted by the novel coronavirus, such as extending certain protections through 2021 and lowering interest rates on new student loans.
The letter — sent Monday to House Speaker Nancy Pelosi (D-Calif.) and Minority Leader Kevin McCarthy (R-Calif.) — called on Congress to, in upcoming legislation, extend the relief for student loan borrowers included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act until June 30, 2021, or until the unemployment rate falls below 8% for three consecutive months.
“By making a college education more affordable, Congress can ensure students do not drop out due to sudden changes in their financial circumstances and that prospective students are able to begin postsecondary education,” the groups wrote. “By providing loan relief to borrowers who have already left campus, Congress would ensure that more money is available for their immediate needs, and that additional financial security is available to Americans struggling in these difficult times.”
As part of the CARES Act, interest accrual and payments on federally-held student loans was paused for six months. In addition to extending that protection by another nine months, the groups also advocated for applying it to all federal loans, including commercially-held Federal Family Education Loans (FFEL) and Perkins Loans.
The letter also asked Congress to defer student loan payments for graduates entering the workforce for an entire year, as opposed to the current six-month grace period.
For student loans disbursed after the next relief package, the groups said interest rates should be dropped to 1.5% and origination fees should be eliminated.
The groups also posed two ideas for long-term relief — which included easing the process for student borrowers to file for bankruptcy, and ensuring loans forgiven through an income-driven repayment program are not counted as taxable income.
“Individuals forced to declare bankruptcy should not be forced to go through that process and still find themselves owing money on student loans,” the groups wrote, adding that due to the current economic situation and unprecedented unemployment numbers, more Americans in the near future will declare bankruptcy.
“When they do, all debts, including student loans, should be eliminated,” they continued. “This will help those whose investment in higher education was significantly curtailed by the current crisis and would be an important step in their own economic recovery.”
Finally, the letter asks that should Congress pursue a policy that would forgive any amount of student debt for borrowers, it first takes into account “the scope of such a program and the capacity of the Department of Education to implement it.”
“Any large-scale debt relief initiative would prove very expensive, and may benefit high-income and other borrowers who do not require assistance in meeting their obligations,” the groups wrote. “Therefore, we believe that any debt relief program should be targeted to borrowers who are financially distressed and face the greatest difficulty repaying their loans.”
For more information and resources on how the spread of the novel coronavirus is impacting student financial aid, please refer to NASFAA's COVID-19 Web Center.
Publication Date: 4/21/2020