Today, the Ministry of Education announced that he would stop the collections on student borrowers in default under the old federal bank-based student loan system.
The CARES law passed in March 2020 suspended payments and interest to student loans held by the federal government until September 30, 2020. This suspension has been extended several times. More recently, President Biden extended the break at least until September 30, 2021.
However, this only applied to borrowers with loans held by the federal government. Millions of student borrowers receiving loans under the Federal Family Education Loan Program (FFEL) have been excluded from this protection and benefit. While some of these loans have been purchased by the Department of Education, most are held by commercial lenders or guarantee agencies.
The actions taken by the department today mean that more than one million student borrowers with federal loans held in commerce that are currently in default will no longer be in collection. In addition, their interest rate will be set at zero percent.
The Ministry also made this retroactive to March 13, 2020. Borrowers in default since then will be reimbursed for all income tax returns and wages that have been foreclosed. The Department will go further and reimburse accrued interest on overdue loans during this period.
The representative of the Chairman of the House Education and Labor Committee, Bobby Scott (D-VA), applauded the decision. In a statement, he said: “Today the Biden administration took another step to expand aid to those in need. student loan borrowers in the context of the Covid-19 pandemic. While Congress previously suspended accrued interest and collections for distressed borrowers with loans held by the federal government, these provisions did not cover borrowers with loans held in commerce under the federal loan program. family education.
Scott also said House Democrats have introduced several laws in the past to address this issue, but “Republicans in Congress and the previous administration blocked action that would have provided a financial lifeline for borrowers who took behind the private companies. student loans. “
Yet this only applies to borrowers who have defaulted. Millions of borrowers with loans held in the trade will not receive the payment or the interest break.
Earlier this year, Congressman Joe Courtney (D-CT) introduced a bill that would extend the benefits of the CARES Act to student borrowers with federal student loans held by businesses. Courtney’s legislation would also make benefits retroactive to March 12, 2020. Courtney’s bill would cover the roughly 8 million student borrowers, not just those in default.
However, his bill has not yet been passed. Without legislation, it might be difficult for the Ministry of Education to use executive action to make all FFEL borrowers eligible for CARES law relief.