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House Democrats Introduce Bill Aimed at Easing Transition Back Into Student Loan Repayment

By Hugh T. Ferguson, NASFAA Managing Editor

Congressional Democrats have unveiled new legislation seeking to ease student loan borrowers' transition into resuming repayments on their student loans, which is now expected to resume no later than June 30, 2023.

The Student Loan Borrower Safety Net Act — introduced on Tuesday by Reps. Suzanne Bonamici of Oregon, Lucy McBath of Georgia, and Susan Wild of Pennsylvania — would require the Department of Education (ED) to provide borrowers with at least six notices indicating when student loan repayments will resume, a borrower’s eligibility for available repayment plans, and options for borrowers who are in default.

“Returning to repayment may still be difficult for some, especially borrowers who are at risk of delinquency and default,” Bonamici said. “I look forward to getting this important legislation over the finish line and working with the Department of Education on its implementation.”

Specifically the legislation, which has been endorsed by NASFAA, would prioritize outreach to borrowers who missed a payment for a period not less than 60 days in the five years preceding March 31, 2020 and for borrowers who in the five years preceding March 31, 2020 missed a payment in the first three months of entering repayment and entered into a non-administrative forbearance or economic hardship deferment.

If a borrower wishes to change their repayment plan during the transition, ED would be required to notify the borrower of the most affordable and generous repayment plan available to the borrower.

Additionally, the legislation would clarify a borrower’s ability to access economic hardship support and provide borrowers with additional protections should they miss their first payment following the end of the payment pause. If a borrower misses their first obligated payment, ED would be required to place the loan in administrative forbearance for 90 days, beginning 60 days after the first day on which the borrower’s payment obligations resume, and to contact that borrower on at least six separate occasions informing them of the resumption of repayments.

Republicans have previously introduced legislation that would block the Department of Education (ED) to continually issue extensions of the payment pause, overhaul the student portfolio, and pressure the department to detail its plans on restarting student loan repayment.

Democrats have also urged ED to detail their plans to end the payment pause and recently unveiled their own proposal that seeks to overhaul the repayment system.

Bonamici has also reintroduced legislation intended to help student loan borrowers avoid default by automatically enrolling delinquent borrowers in income-driven repayment (IDR) plans and streamlining the recertification process.

Check out NASFAA’s Q&A with Anthony Jones, Chair of the Resumption of Loan Repayment Task Force, which will issue a report detailing what schools and financial aid administrators should be thinking about in preparation for borrowers transitioning back into repayment on federal student loans.

 

Publication Date: 2/1/2023


David S | 2/1/2023 5:42:48 PM

Some of this should be standard practice, but what should also be done is wiping all defaulters’ slates clean. Let them re-establish good credit and get back into an affordable repayment plan. The loan repayment process is filled with too much punitive penalties, and it becomes a lose-lose.

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