- The Ministry of Education has announced its intention to restore the good name of defaulting student loan borrowers.
- Senator Warren and his colleagues have asked the department for details on how it plans to do this.
- More than 7 million borrowers are in default and at risk of wage garnishment and garnishment of benefits.
Two weeks ago, President Joe Biden’s Education Department announced a plan to reinstate borrowers who are behind on payments in good standing. It also extended the pause on student loan payments for another four months.
Now, Massachusetts Senator Elizabeth Warren wants to know how this plan will be implemented.
On Wednesday, Warren — along with Democratic senses Raphael Warnock, Bernie Sanders, Cory Booker, Chris Van Hollen, Tammy Baldwin, Richard Blumenthal and Dick Durbin — sent a letter to Education Secretary Miguel Cardona regarding student loan borrowers in fault.
Specifically, the letter – obtained exclusively by Insider – referred to the department’s recent decision to give 7 million borrowers in arrears, arrears or in default a “fresh start” and get them back in good standing before that payments resume after August 31.
“This decision, which we requested in a November 2021 letter, has the potential to provide significant relief to millions of borrowers, especially those who are struggling the most to repay their loans,” the lawmakers wrote. . “We are writing to you now to request further details of the steps the ED (Department of Education) intends to take to implement this plan and protect borrowers who have been in default for an extended period. “
Biden’s recent move to extend the pause on student loan payments and reinstate defaulting borrowers was reportedly considered last year, and it followed several reports that sounded the alarm about borrowers in arrears if payments resumed. too early.
The lawmakers wrote that removing borrowers from default would mean “millions of people will not be immediately subjected to wage garnishment, withholding of tax refunds and aggressive collection practices that threaten to jeopardize their economic security”. Additionally, they noted that borrowers can remain in default for years and are often unable to get rid of their debt by filing for bankruptcy.
They requested information from the Education Department on the following points before May 4, 2022:
- How many borrowers will benefit from the “fresh start” program?
- Will deleting the default status happen automatically?
- How will borrowers with private FFEL loans be impacted?
- And will the ministry forgive the loans of those in long-term default?
Getting borrowers back to good standing will also allow them to enroll in Income Contingent Repayment (IDR) plans, which allow some borrowers to make $0 payments that will still count towards possible loan cancellation after a repayment period of 10 to 25 years. Recent data from the Government Accountability Office revealed that only 157 borrowers have been approved for forgiveness since June last year, partly due to flaws in tracking borrowers’ payment progress.
The department last week announced a series of measures to fix IDR plans and bring 3.6 million borrowers closer to forgiveness, and Warren was among lawmakers calling for reforms to give borrowers the relief “that had been given to them.” promise,” she said. wrote on Twitter.
Now she and her fellow Democrats want to make sure defaulting borrowers have all the information they need if Biden chooses to resume payments in September.