Van Hollen, Warren, Warnock, Colleagues Ask Department of Education for its Plans to Provide a "Fresh Start" to Student Loan Borrowers in Default
In April and November 2021, Senators Called on Biden Administration to Give Relief to Borrowers in Default
U.S. Senators Chris Van Hollen (D-Md.), Elizabeth Warren (D-Mass.), Raphael Warnock (D-Ga.), Cory Booker (D-N.J.), Richard Blumenthal (D-Conn.), Tammy Baldwin (D-Wis.), Dick Durbin (D-Ill.), and Bernie Sanders (I-Vt.), sent a letter to Secretary of Education Miguel Cardona, asking the Department of Education (ED) for details about its plan to give a “fresh start” to student loan borrowers in default before loan payments resume after August 31, 2022. Their letter follows ED’s recent announcement of the extension of the student loan payment pause through August 2022 and its intent to provide a “fresh start” to borrowers in default by eliminating the impact of delinquency and default and allowing these borrowers to enter repayment in good standing.
“More than 7 million federal student loan borrowers are currently in default on their federal student loans. A disproportionate number of these borrowers are low income, people of color, first generation college students, veterans, student parents, students with disabilities, and people who did not complete college. Removing these borrowers from default when student loan payments and collections resume means that millions will not be immediately subject to wage garnishment, tax refund withholding, and aggressive collections practices that threaten to undermine their economic security. It also makes these borrowers eligible to enroll in Income-Driven Repayment plans,” wrote the senators.
Many borrowers in default have been subject to collections for a lengthy amount of time: more than 2.1 million borrowers who were in default or at least 91 days delinquent on their federal student loans at the end of 2019 had been in repayment for 20 years or more, and another 3.4 million borrowers in default or delinquent had been in repayment for between 10 to 20 years. The senators argue that the data suggests that borrowers who remain in default even after ED has garnished their wages, tax returns, Social Security, and other benefits for years may remain in default because they do not have money to be collected, not because they are choosing not to make payments. The Higher Education Act of 1965 gives ED the clear authority to automatically remove those with federally managed loans from default status and to discharge cases of long-term default. The senators also argue that ED could grant borrowers in long-term default further relief by enforcing the Federal Claims Collections Standards, which states that agencies may compromise a debt if “the debtor is unable to pay the full amount due in a reasonable time…or the cost of collecting the debt does not justify the enforced collection of the full amount.”
The senators are calling on ED to answer a set of questions about its plans to implement the “fresh start” program for borrowers in default before the payment pause expires and its plans to provide further relief to borrowers in long-term default by May 5, 2022.
In April 2021, Senator Van Hollen joined Senators Warren and Warnock in urging ED to take swift action to automatically remove all federally-held student loan borrowers from default. In November 2021, Senator Van Hollen joined Senator Warren in a letter urging Secretary Cardona to use his authority to automatically remove all student loan borrowers in default on federally-held loans from their default status and to develop a policy to discharge debt for borrowers who have been in default for an extended period of time.
Full text of the letter is available here.
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