NASFAA Issue Brief Examines Challenges in Student Loan Repayment

Myriad changes over time have contributed to a complex system that can confuse borrowers and prevent them from reaping the full benefits available to them.

Contact: Erin Powers
Director of Marketing & Communications 
(202) 785-6959 

WASHINGTON, DC, May 10, 2021 — Even before the coronavirus pandemic took a toll on the financial lives of most Americans, millions of student loan borrowers were struggling to make their monthly payments. Though there are repayment benefits and protections available to borrowers with federal student loans, multiple changes and tweaks over the years have created a tangled web of repayment options that can confuse borrowers and prevent them from taking full advantage of the repayment flexibilities available.

In a new issue brief, the National Association of Student Financial Aid Administrators (NASFAA) explores the complexities of the federal student loan system, the complicated web of repayment options available to borrowers, communication issues that can arise between the federal government, its contracted loan servicers, and borrowers themselves, and what action Congress and the White House can take to alleviate those problems.

In order to curb unnecessary student loan indebtedness and improve on the current repayment system, Congress can: 

  1. Ensure a smooth transition to repayment after the COVID-19 pause ends.

  2. Ensure smooth and timely implementation of the FUTURE Act.

  3. Consolidate and simplify the federal loan repayment plans.

  4. Strengthen Public Service Loan Forgiveness.

  5. Eliminate student loan origination fees.

  6. Restore graduate and professional student eligibility for subsidized loans.

  7. Provide financial aid offices with more tools to curb student indebtedness.

  8. Increase front-end investment by doubling the maximum Pell Grant.

Additionally, Congress and the Biden administration can consider a number of other proposals, including eliminating negative amortization, automatically enrolling delinquent borrowers in income-driven repayment plans, and exploring targeted debt forgiveness.

“Overhauling the student loan repayment system is long overdue. With millions of borrowers set to resume repayment of their student loans in a matter of months, the time for change is now,” said NASFAA President Justin Draeger. “There are several practical steps, many of which already have bipartisan support, that policymakers can take to provide continued support for the millions of borrowers who were, and still are, experiencing hardship in the wake of the pandemic — as well as for future borrowers.”

NASFAA policy experts are available to speak more about the student loan repayment system and proposed reforms. To set up an interview, please email NASFAA Director of Marketing and Communications Erin Powers or call (202) 785-6959.

About the National Association of Student Financial Aid Administrators 

The National Association of Student Financial Aid Administrators (NASFAA) provides professional development for financial aid administrators; advocates for public policies that increase student access and success; serves as a forum on student financial aid issues; and is committed to diversity throughout all activities. NASFAA’s membership includes 22,000 student financial assistance professionals at approximately 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every 10 undergraduates in the U.S.

Publication Date: 5/10/2021

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