By Hugh T. Ferguson, NASFAA Staff Reporter
With less than five months remaining until the current federal moratorium on student loan repayment and interest accrual is slated to expire, a group of higher education policy experts urged the Department of Education (ED) to utilize this pause to better improve the student loan repayment process.
The main focus of the discussion, hosted by the Bipartisan Policy Center, highlighted how ED could improve the student loan repayment process in a way that better supports borrowers, improves repayment outcomes, and reforms income-driven repayment (IDR) plans.
Beth Akers, a resident scholar at the American Enterprise Institute (AEI), called for the IDR program to be well-functioning and clear, which in her mind would have prevented the government from implementing a “one-size-fits-all approach” to the loan moratorium and better target aid to struggling borrowers.
“If we'd had a well-functioning, universal IDR program at the onset of the pandemic, then we wouldn't have had to think about using executive action to intervene, and I think that's the direction that we should be moving,” Akers said.
Sarah Sattelmeyer, a project director for education, opportunity, and mobility in the higher education initiative at New America, urged for more reporting on quantitative data related to IDR plans.
“We really don't fully understand how people are using IDR, when they're using it, who's in and who's out at different points in time,” Sattelmeyer said. “Getting more data into the hands of advocates, researchers, and policymakers — it should be a top priority.”
For Sattelmeyer, IDR could best be improved by removing administrative burdens that would lessen barriers for borrowers entering the payment plan and provide borrowers with clearer pathways to their repayment options under IDR.
Sen. Marco Rubio (R-Fla.) — who serves as a member of the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies — touted his previously introduced proposal, the Leveraging Opportunities for Americans Now (LOAN) Act, which would eliminate interest on federal student loans, replacing it with a financing fee that would be equal to the amount the loan costs to service, paid over the life of the loan.
“I’m someone who dealt with his fair share of student loans,” Rubio said of his undergraduate and law school debt. “I personally understand the financial difficulties of those, what seem to be never ending monthly payments and the challenge that poses.”
In his prepared remarks at the outset of the discussion, Rubio largely panned any legislation centering on blanket student loan forgiveness and instead urged a “revamp” of the “broken federal Direct student loan system.”
Kat Welbeck, the deputy director of advocacy and the civil rights counsel at the Student Borrower Protection Center, said that policy solutions need to take into account the financial struggles borrowers were facing pre-pandemic.
Specifically, she urged policymakers to consider solutions that address the student loan repayment system as a whole so that when repayment resumes, borrowers do not find themselves in default nine months later.
“We see that many people still haven't fully recovered and the payment pause has really provided some sort of relief to borrowers in this situation,” Welbeck said. “There are some programmatic fixes that really need to be taken into consideration before we even talk about turning on payments.”
The discussion also included insight from the student loan servicing industry, which throughout the payment pause has not needed to invest as many resources due to the fact that payments are not due.
However, there is concern about servicers having the tools they need well ahead of the payment resumption once additional staff is needed to handle the payment transition process.
Scott Buchanan, executive director at the Student Loan Servicing Alliance, stressed the importance of having a roadmap from ED to prepare for the eventual return to repayment.
“You have to go through a clearance process with the Department of Education,” he said. “It's a very cumbersome process to do, and there's a good reason why we do that process, but we need the time in order to accomplish it.”
It will take servicers months to reach staffing capacity, he added. In order to comply with a payment resumption, Buchanan said they need two to three months of lead time to successfully transition borrowers.
While Education Secretary Miguel Cardona recently said it was “conceivable” for the suspension to be extended past Sept. 30, 2021, Buchanan remained hopeful that the department could at least lay out its intended timeline so servicers could best prepare staff and borrowers.
“We are at the stage where we need to know that plan today in order to begin executing against a deadline,” Buchanan said. “We are really at the time where that plan needs to be developed and communicated and we're waiting on that.”
Publication Date: 5/13/2021
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