With less than 100 days until student loan repayments are set to resume following their suspension under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a group of higher education policy experts discussed what continued federal efforts could be made to aid struggling borrowers, who have suffered financially during the pandemic.
The discussion, hosted by the Bipartisan Policy Center, centered around how the federal government can support student borrowers in its next COVID-19 aid package, while opening pitches are still being made, and urged for increased simplicity in repayment plans as well as clear and timely guidance for borrowers on relief efforts.
NASFAA has organized and highlighted a number of policy proposals aiming to improve or modify the process by which students borrow and repay their loans. For student loan and repayment proposals from the previous sessions of Congress, visit the Legislative Tracker Archive: Loans & Repayment.
“Folks are confused on what [benefits] the CARES Act, that's already in law, extends ... to them, what that really means to them,” said Nathan Hench, senior vice president for public affairs at Pennsylvania Higher Education Assistance Agency (PHEAA). “The concern that we have from a servicer is how do we re-engage borrowers to have them start thinking about repayment?”
Should Congress wait to grant additional relief until September, when the repayment resumption period becomes imminent, advocates worry that they’ll confuse borrowers in presenting them with outdated options available to them.
“If we start those conversations and then Congress comes out with an extension for CARES, it's only going to further confuse borrowers who aren’t necessarily watching congressional legislation like all of us do, and we're mindful of that,” Hench said.
Further compounding the issue is the pandemic’s disproportionate impact on Black and Hispanic communities, which has now been coupled with the student debt burden facing these borrowers.
“We are at a crisis point with student debt that is impacting the economy and communities that's only been exacerbated by the COVID-19 crisis,” said Ashley Harrington, federal advocacy director and senior counsel at the Center for Responsible Lending.
Many of these borrowers were already financially stressed before the pandemic, and while congressional relief has reached some to stem the initial economic shock, the aid has not addressed systemic issues that have been bubbling for the past several decades, nor has it covered all student loans, Harrington added.
“We're going to be in a situation where so many consumers, so many borrowers have financial insecurity that has greatly increased,” Harrington said. “That's definitely going to impact their ability to navigate and successfully manage their student debt.”
As a more long-term solution, the panel delved into discussing the merits of reworking a federal income-driven repayment (IDR) plan — such as by consolidating existing IDR plans — and broad student debt cancellation.
“If you combine loan forgiveness with income driven repayment you're kind of solving the same problem twice,” said Andrew Gillen, senior policy analyst at The Texas Public Policy Foundation. “And if you look at the way we've done forgiveness, so far it's been very badly targeted, very generous to populations that we don't necessarily need to be so.”
While Gillen argued that IDR methods would be more beneficial, Harrington pointed out that data on IDR plans are still new and have taken in some cases 25 years to yield debt forgiveness.
“How much did we lose by the fact that someone couldn't start a business for 20 to 25 years, that someone couldn't buy a house for 20 to 25 years?” Harrington said. “We have people who [are] still paying back their loans when their kid goes to college and [have] to take out more loans, so then they can't help their kid ... because they are still paying back their own. How much do we lose?”
Hench said lawmakers need to be very mindful of how they craft loan forgiveness and student debt relief programs and not set consumers’ expectations at too high a bar.
“They want to create something new — and it's more fun to build new highways, but not repair the old ones,” Hench said. “Sometimes I think they get left off to the side and then there's some disappointed borrowers or consumers that are left in those old programs.”
Publication Date: 6/26/2020