Top Education Committee Republicans Urge Cardona to Resume Student Loan Payments Come Fall

By Owen Daugherty, NASFAA Staff Reporter

Top Republican lawmakers are pressing Education Secretary Miguel Cardona for details on the Department of Education’s (ED) plan to smoothly transition millions of student loan borrowers back into repayment when the federal forbearance period comes to an end in the fall.

An additional extension of the pause on payments and interest accrual is “unnecessary” and would “actively work against the interests of students and taxpayers,” wrote Sen. Richard Burr (R-N.C.), ranking member of the Senate Health, Education, Labor, and Pensions (HELP) committee, and Rep. Virginia Foxx (R-N.C.), ranking member of the House Education and Labor committee.

Citing figures showing progress on vaccination rates and low COVID-19 cases nationally, the letter argues it is time for ED to have a plan to help millions of borrowers with federally-held student loans successfully transition back into active repayment status after what will amount to more than 18 months without having to make payments due to the coronavirus pandemic.

Burr and Foxx in the letter said the loan pause has cost taxpayers $40 billion in fiscal year 2020 alone, not counting the fiscal year 2021 costs or the $63 billion in loan re-estimates added to the program costs in 2020 “due to previously unanticipated levels of forgiveness,” likely referring to additional debt forgiveness ED provided to borrowers with already approved borrower defense claims made under former Education Secretary Betsy DeVos and retroactive relief recently provided to borrowers with Federal Family Education Loans (FFEL).

Additionally, they point to the fiscal year 2022 budget request, which estimates the loan pause currently set to conclude at the end of September will cost an additional $36 billion.

“Millions of families will depend on the department’s ability to reactivate the frozen loan portfolio,” the letter states. “Your job is to plan and execute a seamless transition, which we expect you have been preparing for since you were confirmed in March.”

Pointing to a requirement in the Coronavirus Aid, Relief, and Economic Security (CARES) Act mandating that borrowers receive at least six communications in the weeks before payments will resume, the lawmakers asked Cardona to detail what form those communications will take and if ED is mandating the same language across all student loan servicers.

NASFAA, along with several higher education organizations, has also submitted recommendations to ED and Federal Student Aid (FSA) to ensure borrowers are smoothly and successfully transitioned into repayment.

Further, the lawmakers want to know if ED will create more than six notices for borrowers and if additional notices will only be sent to borrowers with demonstrated financial distress.

They also want to know if ED will clearly communicate that income-driven repayments plans are a viable option for borrowers in financial distress and give clear directions on how they can enroll, and asked the department if it will communicate how borrowers enrolled in auto-debit payments prior to the loan pause will be treated reentering repayment.

Due to the fact that loan servicers contracted by ED will largely be tasked with performing the communications to borrowers, Foxx and Burr asked Cardona a variety of questions regarding the state of the loan servicers, such as whether the department has assessed the current capacity of student loan servicers considering many trimmed staff amid the pandemic.

Specifically, the lawmakers asked Cardona to confirm whether the student loan portfolio will return to active repayment in October so the servicers can bring on additional personnel to meet the increase in demand.

Many of the questions center around ED’s communication plan with servicers and how they will convey the various options available to borrowers in the notices sent before payments resume.

Cardona has been mum up to this point on ED’s plans for the transition to repayment come fall and whether an extension to the pause is an option as the country is showing positive signs coming out of the pandemic.

The lawmakers have asked Cardona to submit answers to their list of questions no later than June 7. The letter to Cardona comes on the heels of a similar letter from Senate Democrats, including Sen. Elizabeth Warren (D-Mass.), asking what ED’s plan is for the transition to repayment status.

 

Publication Date: 6/3/2021


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