WASHINGTON, DC - MARCH 29: U.S. President Joe Biden delivers remarks on the COVID-19 response and ... [+]
The Biden administration today announced an expansion of emergency student loan relief that could protect hundreds of thousands of student loan borrowers from collections efforts. Here’s what you should know.
Background: Student Loan Relief Under The CARES Act Excluded Certain Student Loans
Collections efforts on most defaulted federal student loans have been suspended under the CARES Act since March 2020. That legislation temporarily stopped all collections-related activities including wage garnishments, offsets of Social Security benefits, and seizure of federal tax refunds. President Trump extended the CARES Act’s student loan relief provisions twice while in office via executive action, and President Biden extended the relief further to September 30, 2021.
The CARES Act — which was passed by Congress and signed by President Trump — limited student loan relief to federal student loans held by the government. Excluded from the CARES Act’s protections were student loans that not held by the government, such as Family Federal Education Loan (FFEL) program loans held by guaranty agencies and federal Perkins loans held by schools; around 9 million borrowers have one or more student loans under these programs. Private student loans also have no protections under the CARES Act. The exclusion of these student loans from the collections suspension has carried through the extensions initiated by both President Trump and President Biden.
While some non-government student loan lenders provided temporary pandemic relief on a voluntary basis, they were not required to do so under the CARES Act. And now that the pandemic has been ongoing for over a year, many of these lenders have resumed collections efforts. So while many student loan borrowers continue to be protected under the student loan provisions of the CARES Act, millions of other borrowers have been facing new collections efforts, including wage garnishments.
Biden’s Expanded Student Loan Relief
In today’s announcement, the Biden administration indicated that the Department of Education will be expanding the collections moratorium to encompass defaulted Family Federal Education Loan (FFEL) program loans held by guaranty agencies. This means that collections activities on these student loans must cease, just as the suspension has been applied to government-held federal student loans since March of last year. Wage garnishments and Social Security offsets must stop, and new collections efforts cannot be initiated during the suspension period, which will continue to at least September 30, 2021.
What’s Not Included In Biden’s Expanded Student Loan Relief?
President Biden’s expanded student loan relief will protect potentially hundreds of thousands of student loan borrowers with defaulted FFEL loans from ongoing collections efforts. However, federal Perkins loans and private student loans are still not covered. Private lenders in particular have fewer collections tools to pursue borrowers; in most cases, private lenders do not have the power to garnish wages or seize assets without first obtaining a court judgment. But private lenders can continue to pursue borrowers in default on their private student loans.
In addition, the expanded relief does not cover borrowers in good standing on their FFEL loans, Perkins loans, or private student loans. The CARES Act suspended all payments and interest on government-held federal student loans that are in good standing; those relief provisions were not just limited to borrowers who were in default. But Biden’s current expansion is limited only to defaulted FFEL loans. Borrowers with FFEL loans in normal repayment will need to continue their payments, and interest will continue to accrue.
Student loan borrower advocates criticized the administration for not going further. “Today’s announcement will help some borrowers who had been ignored by Washington, even as the pandemic grew and the economy collapsed,” said Student Borrower Protection Center Executive Director Seth Frotman in a statement. “Unfortunately, this action is incomplete — it does nothing for the more than 5 million commercial FFEL borrowers who are not in default. Borrowers with commercial FFEL loans need Washington to stop drawing arbitrary lines that leave them without any protection or assistance. It is clear that the Department has the legal authority to protect all federal student loan borrowers during the pandemic and provide real relief—it is long past time for them to use it.”
What’s Next?
The administration’s latest move is just the most recent in its efforts to address the student loan crisis facing many Americans. In addition to extending the CARES Act’s student loan moratorium and expanding the collections protections to include FFEL loans, Biden also signed into law his sweeping new stimulus package which will exempt student loan cancellation and forgiveness from taxation under federal law through the end of 2025. Last week, newly-appointed Education Secretary Miguel Cardona announced policy changes that will result in student loan cancellation for 72,000 student loan borrowers and may allow colleges to use stimulus funds to cancel institutional student debts in certain limited situations. And the Biden team announced yesterday an easing of bureaucratic rules for disabled student loan borrowers that may allow 41,000 borrowers to get their student loans re-discharged after reinstatements.
While advocates for student loan borrowers have offered some tepid support for the administration’s efforts, they insist that Biden must take much stronger steps to provide lasting relief to millions of student loan borrowers. Advocates for borrowers have been arguing for months that the best path forward to address student loan debt is not incremental reform, but widespread student loan forgiveness.
Further Reading
72,000 Borrowers Will Get $1 Billion In Student Loan Forgiveness - Do You Qualify?
Biden To Initiate Additional Student Loan Relief This Week — But Borrowers Demand Full Cancellation
Is $10,000 In Student Loan Forgiveness Next, After Biden Administration Cancels $1 Billion?
Congress Passes Biden’s Stimulus Bill: 6 Takeaways For Student Loan Borrowers
Stimulus Bill Has This Hidden Student Loan Tax Benefit
Congress Makes Big Change To Income-Based Repayment: What Student Loan Borrowers Should Know
Here’s Everyone Who Wants Biden To Cancel Student Loan Debt (It’s A Big List)
Whether Biden Cancels Student Debt Will Depend On These 3 Things
Could These Student Loan Borrowers Be Excluded From Biden’s Forgiveness?
