By Owen Daugherty, NASFAA Staff Reporter
Top Democratic senators are urging Education Secretary Miguel Cardona to return defaulted student loan borrowers to good standing before payments on federally-held student loans resume in February after a nearly two-year hiatus.
In a letter to Cardona, Sens. Elizabeth Warren (D-Mass), Bernie Sanders (I-Vt.), Cory Booker (D-N.J.), and six other senators said the Department of Education (ED) “has an opportunity to relieve a significant burden on borrowers by developing a policy to forgive debts for borrowers who have been in default for an extended period of time.”
“Allowing payments and collections to resume without taking these actions to protect borrowers in default would undermine our economic recovery, and I urge you to take immediate steps to prevent these borrowers from being further harmed,” the letter added, noting that nearly 8 million borrowers entered the pandemic in default on their federal student loans.
The letter also brought attention to the fact that if these borrowers are still in default status when payments resume in February, they could have their wages or Social Security benefits garnished.
Should ED make the decision to return eligible defaulted borrowers to good standing, they would have the option to enroll in income-driven repayment (IDR) plans, giving them the ability to repay their loans over time with more affordable monthly payments.
The letter cites ED’s authority to enter borrowers into a rehabilitation program, which would allow borrowers to make nine monthly payments in order to be brought back into good standing. Given the pause on payments and interest accrual amid the pandemic, borrowers could count $0 payments toward their progress, the letter asserts.
“As a result of the nationwide payment freeze, all defaulted borrowers with federally-held student loans have now met the requirement for completing nine payment obligations and are thus eligible for rehabilitation,” according to the letter.
The lawmakers concluded by urging Cardona and ED to use “every available statutory, regulatory, and administrative authority” available to assist borrowers and automatically rehabilitate all federally-held student loans without requiring borrowers to submit an application.
Publication Date: 11/22/2021