Biden dragging feet on emergency action for federal student loan relief

The Student Borrower Protection Center (SBPC) and the National Consumer Law Center (NCLC) say that the U.S. Department of Education is moving too slowly on plans to aid millions of struggling federal student loan borrowers from the harsh consequences of default.

The effort to help those borrowers, which has not been finalized, is being internally referred to as “Operation Fresh Start,” but bureaucrats must recognize the urgency of relief that is critically needed for millions in poverty or living in the shadow of default on their debt.

In March 2020, Congress enacted the CARES Act, which suspended student loan payments, interest charges, and debt collection for tens of millions of borrowers who owe student loans held by the U.S. Department of Education.

As part of this emergency legislation, Congress required the Secretary of Education to count each month during which payments were suspended as a month spent making progress toward the Education Department’s “loan rehabilitation” program for borrowers in default.

Beginning in September 2020, President Donald Trump and President Joe Biden have extended the suspension of student loan payments under the same terms as those enacted by Congress at the start of the COVID-19 pandemic. 

As a result, all borrowers with defaulted student loans have now earned two years of credit toward “loan rehabilitation”– a program that ends student loan default and restores borrowers’ access to income-driven repayment and other consumer protection and safety net programs intended to help economically vulnerable borrowers make ends meet.

A 2020 report from The Institute for College Access and Success identified New Jersey for being a state with a significant student debt problem, with the average student debt total for Garden State residents in the college Class of 2019 being roughly $33,566 — the seventh-most of any state. 

Because eligibility to rehabilitate loans out of default requires only nine qualifying months of payment, all of these borrowers are now eligible for rehabilitation, and the Biden administration should automatically remove all of them from default and give them a fresh start at repayment.

If the Biden administration fails to take this necessary action as authorized under the law, millions of student loan borrowers will be at the mercy of the Education Department’s out-of-control debt collection machine.

“Before the pandemic, more than seven million student loan borrowers had already fallen through the cracks of our badly broken student loan system,” said SBPC Policy Director Mike Pierce. “Secretary Cardona and the Biden administration must not fail these borrowers a second time. Instead, the Department of Education should keep its promises to borrowers in default and provide them with a clean slate.”

“Without action on the part of the Department of Education, on February 1, millions of student loan borrowers are going to immediately lose access to much-needed wages, social security benefits, and anti-poverty payments made through tax refunds – including the Child Tax Credit and Earned Income Tax Credits which have lifted millions of children out of poverty,” said Persis Yu, director of the NCLC’s Student Loan Borrower Assistance Project.

“Defaulted student loan borrowers – disproportionately women and people of color – desperately need relief in order to recover from the economic impacts of the pandemic,” said Yu. “We call on the Department of Education to take all steps within its power, including cancellation and rehabilitation, to keep these borrowers from falling over the financial cliff on February 1.”

The amount of student loan debt outstanding in the United States is now $1.73 trillion.

The Federal Reserve estimates that in quarter two of 2021, Americans owed a startling $1.73 trillion, a record-breaking total that marks an increase of 3% compared to quarter two of 2020 — despite a lengthy pause on federal student loan interest rates and the elimination of billions of federally held student loans by the Biden administration.

The decades-long increase in student debt is even more noticeable when compared to decades prior. In quarter two of 2011, Americans owed roughly $905 billion in student loans which means that U.S. student debt has increased by more than 91% in the past decade.

New Jersey was ranked 17 among states most impacted by student debt, with data suggesting that borrowers from here experience worse than average ratios of student debt to income and that a high percentage of borrowers are behind on their student loan payments.

Earlier this year SBPC and NCLC warned that millions of low-income student loan borrowers would be vulnerable to wage garnishment, offset of tax refunds and social security checks, and the seizure of President Biden’s signature Child Tax Credit.

On Oct. 6, 2021, the U.S. Department of Education (ED) announced a change to Public Service Loan Forgiveness (PSLF) program rules for a limited time as a result of the COVID-19 national emergency.

Created in 2007, the PSLF program is intended to forgive the outstanding federal student loan debt for qualifying public workers who have made 10 years of monthly payments.

The Education Department acknowledged the program has fallen short of its pledge to and hopes its overhaul will “restore the promise” of student loan forgiveness. 

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