- The Education Department announced plans to restore defaulted student-loan borrowers to good standing.
- Sen. Warren and colleagues asked the department for details on how it plans to carry that out.
- Over 7 million borrowers are in default and at risk of wage garnishment and seizure of benefits.
Two weeks ago, President Joe Biden's Education Department announced a plan to restore borrowers behind on payments to good standing. It also extended the pause on student-loan payments for an additional four months.
Now Massachusetts Sen. Elizabeth Warren wants to know how that plan will be carried out.
On Wednesday, Warren — along with Democratic Sens. Raphael Warnock, Bernie Sanders, Cory Booker, Chris Van Hollen, Tammy Baldwin, Richard Blumenthal, and Dick Durbin — sent a letter to Education Secretary Miguel Cardona regarding defaulted student-loan borrowers.
Specifically, the letter — obtained exclusively by Insider — referenced the department's recent decision to give 7 million borrowers behind on payments, in delinquency or default, a "fresh start" and return them to good standing before payments are set to resume after August 31.
"This move, which we requested in a November 2021 letter, has the potential to provide significant relief to millions of borrowers, particularly those who have most struggled with repaying their loans," the lawmakers wrote. "We now write to request further detail about the steps ED (Education Department) intends to take to implement this plan and protect borrowers who have been in default for an extended period of time."
Biden's recent decision to extend the pause on student-loan payments and restore borrowers in default to good standing was reportedly considered last year, and it followed multiple reports that sounded the alarm on borrowers falling behind if payments resumed too soon.
The lawmakers wrote that removing borrowers form default will mean that "millions will not be immediately subject to wage garnishment, tax refund withholding, and aggressive collections practices that threaten to undermine their economic security." Additionally, they noted how borrowers can stay in default for years and are often unable to get rid of their debt through bankruptcy.
They requested information from the Education Department on the following by May 4, 2022:
- How many borrowers will benefit from the "fresh start" program?
- Will the removal from default status happen automatically?
- How will borrowers with privately-held FFEL loans be impacted?
- And will the department forgive loans of those in long-term default?
Restoring borrowers to good standing will also allow them to enroll in income-driven repayment (IDR) plans, which allow some borrowers to make $0 payments that will still count toward eventual loan forgiveness after a repayment period of 10-25 years. Recent data from the Government Accountability Office found only 157 borrowers have been approved for forgiveness since June of last year, partly due to flaws in tracking borrowers' payment progress.
Last week, the department announced a series of steps to fix IDR plans and bring 3.6 million borrowers closer to forgiveness, and Warren was among lawmakers who were pushing for reforms to give borrowers the relief "they were promised," she wrote on Twitter.
Now, she and her Democratic colleagues want to ensure defaulted borrowers have all the information they need if Biden does choose to restart their payments in September.