Biden quietly decides how to restart student loan payments


The plans, some of which are still ongoing and not finalized, are aimed at avoiding a potential increase in delinquencies when payments resumed in February, which the Biden administration announced in August.

Reversing the massive $ 1.6 trillion federal student loan apparatus that has largely been frozen for nearly two years is an unprecedented logistical challenge for the Education Department. It is also fraught with political pitfalls as progressives urge the administration to focus on widespread debt cancellation rather than resuming payments.

More than 40 million federal student loan borrowers have benefited from the Department of Education’s hiatus on interest and monthly payments that began in March 2020. The Biden administration recently extended relief until the at the end of January, which officials insisted was the last reprieve.

Education Secretary Miguel Cardona has previously said he wants to create a smooth “acceleration” for borrowers to start payments again. Rich Cordray, the department’s head of student aid, spoke about his plans for a major public awareness campaign, including paid ads, to educate borrowers about their options.

Several internal documents obtained by POLITICO under a Freedom of Information Act request further describe the ministry’s “return to reimbursement” strategy – which it has internally dubbed “R2R”.

“In recognition of the historic impact of a nearly two-year hiatus in student loan repayments, borrowers will benefit from additional flexibility in the early stages of returning to repayment,” the ministry wrote in one documents.

The Education Department declined to comment directly on its plans to restart federal student loan payments.

“A smooth transition to reimbursement is a high priority for the administration,” said an administration official in a statement in response to POLITICO’s request for comment. “Over the next few months, we’ll be releasing more details on our plans and engaging directly with federal student loan borrowers to make sure they have the resources they need.”

Department officials have asked their loan officers to create a “safety net” for borrowers in the first three months after their first payment is due next year, according to internal documents. Borrowers who miss a payment during that initial 90-day grace period would not be penalized or knocked out on their credit reports, according to the plan. Rather, these borrowers would automatically be placed in forbearance status and would be considered up to date on their loans.

The Education Ministry plans to directly reach certain groups of “at risk” borrowers, such as those who were delinquent before the pandemic, never graduated from college, or only recently started repaying their loans. And the agency has increased the opening hours of its loan officers’ call centers, anticipating a deluge of borrower requests in the months to come.

Officials are also discussing proposals that would make it much easier for borrowers to enroll in income-based repayment programs, which typically require borrowers to submit proof of their income and family size each year.

This requirement was suspended during the pandemic. But now that payments are restarting, some 9 million borrowers who participate in the income-based repayment program will have to recertify their income or face a potentially large increase in their monthly payment amount.

To account for this potential deluge of millions of applications, the Education Department is considering allowing borrowers, for a limited time, to quickly self-certify their income and family size over the phone with their loan officer. , according to two people familiar with the plan. .

In addition, the Department of Education is considering a plan to automatically remove more than 7 million borrowers from defaulting on their federal student loans. The effort to help these borrowers, which has not been finalized, is called internally “Operation Fresh Start”, according to people familiar with the plan.

A group of Senate Democrats, led by Senators Elizabeth Warren of Massachusetts and Raphael Warnock of Georgia, earlier this year called on the Biden administration to end defaults on all student loans held by the federal government.

They argue that the Department of Education has the power to do so because the CARES Act allowed defaulting borrowers to account for suspended payments in the event of a pandemic within the nine months of payments that are typically required for a borrower to resolve. its loans through a known process. as “rehabilitation”. Borrowers typically need to complete paperwork with a debt collection company to start this process, but Democrats are pushing the administration to reverse this requirement.

Some Democrats also continue to pressure the Biden administration to use the executive branch to write off up to $ 50,000 in federal student loan debt per borrower. Biden said he was more comfortable with a figure closer to $ 10,000, and the White House said it still decides whether it has the power to write off large amounts of debt using action. of the executive.

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