The Biden government announced on Wednesday a new round of federal student loan relief, including another extension of the ongoing student loan deferral. But the announcement also included a new form of relief that would have a major impact on some borrowers.
Biden extends student loan deferral
Most federal student loan payments and interest rates have been suspended for more than two years, and collection efforts against federal student loan borrowers have also stalled. After several extensions, the relief was completed on May 1st.
But earlier on Wednesday, the administration announced it would extend the suspension of student loan and interest payments for another four months until August 31, 2022. “The resumption of repayment will financially destabilize many borrowers and their families and cause many “They could not afford the repayment,” Biden said in a statement. He argued that another extension would provide relief to borrowers, while allowing the administration to work to improve existing federal student loan programs.
Biden’s student loan relief includes great benefits for defaulting borrowers
There was a significant new benefit to today’s announcement: Borrowers who do not pay their federal student loans will automatically be repaid in good condition and any delinquency will be remedied.
“This extension will include a ‘new beginning’ – eliminating the impact of delinquency and default on all borrowers,” Education Minister Miguel Cardona said in a statement. tweet. “It remains a top priority for the Biden-Harris government to support students, families and borrowers – especially those disproportionately affected by the pandemic.”
Failure to get a federal student loan can be catastrophic for borrowers. The government has powerful collection tools that allow federal lenders and debt collectors to garner wages, prevent federal tax refunds, and offset federal benefits such as Social Security without having to go through the legal system. Failure to do so can also lead to significant financial penalties and credit loss for student loan borrowers. Debt borrowers are also excluded from new federal aid.
CARES law – the legislation that first introduced the termination of student loans – had suspended all collection efforts against borrowers who defaulted on their federal loans. But while relief has allowed months of deferred payments to be counted on loan “repayment” – a federal loan program that allows borrowers to recover federal bankruptcies and repay their loans in good standing after at least nine months of repayment. Education did not automatically restore the borrowers. Instead, the Department continued to require borrowers to submit a positive application for the rehabilitation program and to register by submitting specific documents. As recovery efforts were suspended under CARES, this information was rarely disclosed to borrowers, leaving millions stuck in bankruptcy.
The Biden government’s actions will allow the Department of Education to automatically deduct borrowers from default and restore their accounts to good condition. Officials have not yet released specific details or a timetable for the new “fresh start” program, but it could benefit nine million borrowers.
Supporters praise Biden’s action, but call for stronger relief, including student loan forgiveness
“For too long, defaulting borrowers have escaped the cracks and are suffering from the Ministry of Education’s punitive collection system, which is forcing them to waive wages, social security benefits and income tax credits earned in retaliation. their. for their federal loans, “said Persis Yu, Director of Policy at the Student Borrower Protection Center (SBPC), in a statement. “We welcome the Biden government’s decision to get millions of borrowers out of bankruptcy and give them a fresh start.”
The relief announced today “is significant for borrowers struggling to shoulder the damage caused by pandemics, financial shocks and inflation,” Student Debt Crisis Center (SDCC) President Natalia Abrams said in a statement.
Proponents of her case have been working to make the actual transcript of this statement available online. Proponents of her case have been working to make the actual transcript of this statement available online.
“There is a lot more work to be done to provide additional relief and cancel student debt – we will continue to repeat the voices of our supporters until we are done,” said Cody Hounanian, SDCC Executive Director.
“The Department should not waste this opportunity to repair the damaged student loan system. “Under this new fast-track deadline, the ministry needs to work quickly to end debt collection practices, provide effective avenues for borrowers to get out of debt, and provide a broad debt write-off,” Yu said.
Further reading of a student loan
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