Warren, Colleagues to Education Department: What Steps Are You Taking to Prepare Student Loan Borrowers for Turning Payments Back On?
"We support cancelling $50,000 of debt for each borrower to relieve this burden on our economy, but until that decision is made, we are requesting information on how the Department of Education and Office of Federal Student Aid are preparing for this transition and holding loan servicers accountable to inform and support borrowers."
Washington, D.C. - U.S. Senators Elizabeth Warren (D-Mass.), Tina Smith (D-Minn.), Sherrod Brown (D-Ohio) and Edward J. Markey (D-Mass.) sent a letter to Secretary of Education Miguel Cardona requesting information about the steps the Department of Education (ED) and the Office of Federal Student Aid (FSA) are taking to help transition millions of federal student loan borrowers back into repayment ahead of the scheduled end for paused student loan payments and interest in September. This letter comes as the United States faces a historic student debt crisis, with nearly 43 million Americans crushed under $1.6 trillion in federal student loan debt and millions of borrowers defaulting on their loans every year.
"We support cancelling $50,000 of debt for each borrower to relieve this burden on our economy," the lawmakers wrote, "but until that decision is made, we are requesting information on how the Department of Education and Office of Federal Student Aid are preparing for this transition and holding loan servicers accountable to inform and support borrowers."
The passing of the Coronavirus Aid, Relief, and Economic Security (CARES) Act paused payments for millions of borrowers. Recognizing the significant burden that student debt places on borrowers during an economic crisis, both former President Trump and President Biden have extended this pause throughout the pandemic, with President Biden extending the pause to September 30, 2021, for the 87% of borrowers with direct federal loans. But now, student loan borrowers risk being thrown into extraordinary financial hardship when the current pause on payments ends. Simultaneously, FSA is facing a massive administrative undertaking to ensure that every borrower is protected.
The COVID-19 pandemic continues to wreak havoc on our economy and has resulted in prolonged unemployment rates for many households, making it difficult for them to make ends meet. This financial situation is dire for student loan borrowers and, in particular, borrowers of color, who disproportionately shoulder the burden of student debt. "If struggling borrowers are dropped back into repayment on their student loans with no adjustments or support - and at a time that their financial circumstances are likely to become worse as their unemployment benefits run out - they could find themselves in default or distress, facing a vulnerable situation and disastrous long-term economic consequences," the lawmakers continued.
In the American Rescue Plan, Congress specifically appropriated $91 million to FSA for outreach to borrowers. As loan payments restart, borrowers will need individualized support to assess their current circumstances, identify the repayment plan that best meets their needs, and navigate enrollment or re-enrollment. Additionally, FSA will need to exercise significant oversight to ensure that student loan servicers are communicating with borrowers proactively and have enough staffing to create individualized plans.
Senator Warren is one of the nation's leading voices calling for student debt cancellation to boost our economy, help close the racial wealth gap for borrowers, and put an end to predatory practices that harm and trap borrowers in years of debt.
- In April 2020, Senators Warren and Raphael Warnock (D-Ga.) led a group of colleagues in a letter to Education Secretary Miguel Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.
- That same month at her first hearing as chair of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren called out giant student loan servicer Pennsylvania Higher Education Assistance Agency for its mismanagement of the Public Student Loan Forgiveness Program.
- Senator Warren also questioned Jack Remondi, CEO of one of the nation's largest student loan servicers, Navient, on the company's long history of abusive and misleading behavior towards borrowers and how the company has made millions of dollars by profiting off the broken student loan system.
- Senator Warren has also been continuing her calls for President Biden to use his existing authority to cancel $50,000 in student debt and highlighted data that she obtained from the Education Department revealing the benefit of student debt cancellation.
- In March 2021, Senators Warren and Bob Menendez (D-N.J.) applauded the passage of their Student Loan Tax Relief Act as part of the American Rescue Plan. The provision makes any student loan forgiveness tax-free, ensuring borrowers whose debt is fully or partially forgiven are not saddled with thousands of dollars in surprise taxes. During her time in the Senate, she has helped return tens of millions of dollars tax-free to students cheated by for-profit colleges.
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