HomeSchool Reform NewsStudent Loan Repayment Pause Could End—Someday

Student Loan Repayment Pause Could End—Someday

Pause on student loan repayments could end September 1, when the Biden administration’s income-driven repayment program would cut payments in half.—

Report Calls Out Ed Dept. for Illegal Wage Garnishments During Covid-19 

According to an alarming new report, hundreds of thousands of student-loan borrowers had their wages illegally garnished during the Covid-19 pandemic, despite a congressional order to pause collections starting in March 2020.

An inspector general report found that the Office of Federal Student Aid took quick action and “generally achieved positive results” in suspending most wage garnishments and refunding payments back to borrowers. However, the Student Borrower Protection Center has released a report that found that the garnishments continued through at least August 2021—18 months after the CARES Act of 2020 made it illegal and 10 months longer than the agency’s inspector general reported.

Student loan repayments are potentially set to resume on June 30, unless the courts make a final decision on debt forgiveness before then. Whatever the date, the Student Borrower Protection Center argues the department has a moral obligation not to throw vulnerable borrowers back into a broken system. The Education Department says it will take up debt collection reform as a part of its regulatory agenda next year.

Biden’s Costly Student Loan Payment Pause

President Joe Biden’s pause on federal student loan payments was set to expire on December 31, but it is being extended once again. “It isn’t fair to ask tens of millions of borrowers who are eligible for relief to resume their student debt payments while the courts consider the lawsuit,” Biden said in a video posted to his Twitter account.

First implemented on March 13, 2020, during the Trump administration, the payment pause has been extended multiple times since then by both administrations. Payments will resume 60 days after the department is allowed to implement the program or the litigation is resolved.

If that hasn’t happened by June 30, payments will resume 60 days later, on September 1—42 months after the moratorium began. Altogether, the payment pause could end up costing $195 billion. Looking at this extension alone (from January to potentially August 2023), the cost will be around $40 billion.

Biden’s Proposed Income-Driven Repayment Plan Could Cut Payments in Half 

While President Joe Biden’s one-time student loan forgiveness plan remains tied up by legal challenges, the administration is moving forward with a more far-reaching and costly plan to overhaul how student borrowers repay their loans.

The overhaul of the Education Department’s income-driven repayment program—which bases monthly payments on an individual’s income and family size—would cut payments in half for undergraduates, with a cap of 5 percent on a borrower’s discretionary income. And those who take out $12,000 or less in loans would qualify for relief in 10 years. The new repayment plan would become a permanent fixture of the student loan infrastructure and apply to current and future borrowers.

Roughly 8.5 million, or a third of all federal student loan borrowers, are enrolled in existing income-driven repayment plans, which is up from 1.6 million in 2013. It’s not clear when the new plan will be up and running. The proposal will be open for public comments for 30 days before the rules are finalized later this year.

Originally published by Paideia Times. Republished with permission.

For more on higher education issues read School Reform News.

Paideia Times
Paideia Times
Paideia Times is a quarterly covering higher education news for trustees of public and private institutions.


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