The Biden administration today announced an extension of emergency student loan relief that could protect hundreds of thousands of student loan borrowers from collection efforts. Here’s what you need to know.
Background: Student Loan Relief Under the CARES Act Excluded Certain Student Loans
Efforts to collect most of the delinquent federal student loans have been suspended under the CARES Act since March 2020. This legislation has temporarily halted all collection-related activities, including payday garnishments, payday offsets. social security benefits and the seizure of federal tax refunds. President Trump twice extended the student loan relief provisions of the CARES Act during his tenure through executive action, and President Biden extended the relief until 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 protections of the CARES Act are student loans that are not held by the government, such as Family Federal Education Loan (FFEL) loans held by guarantee agencies and federal Perkins loans held by schools; about 9 million borrowers have one or more student loans under these programs. Private student loans also do not enjoy protections under the CARES Act. The exclusion of these student loans from the collections suspension resulted in the extensions initiated by President Trump and President Biden.
While some non-governmental organizations 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 lasted for over a year, many of these lenders have resumed their collection efforts. So while many student loan borrowers continue to be protected by the student loan provisions of the CARES Act, millions more have faced new collection efforts, including payday garnishments. .
Biden’s Extended Student Loan Relief
In today’s announcement, the Biden administration said the Education Department would expand the moratorium on collections to include defaulting Family Federal Education Loan (FFEL) loans held by guarantee agencies. . This means that collection activity on these student loans must cease, just as the suspension has been applied to federal student loans held by the government since March of last year. Salary garnishments and Social Security compensations must end, and new collection efforts cannot be initiated during the suspension period, which will continue until at least September 30, 2021.
What is not included in Biden’s Extended Student Loan Relief?
President Biden’s expanded student loan relief will potentially protect hundreds of thousands of student loan borrowers with past due FFEL loans from ongoing collection efforts. However, federal Perkins loans and private student loans are still not covered. Private lenders in particular have fewer collection tools to prosecute borrowers; in most cases, private lenders do not have the power to garnish wages or seize property without first obtaining a court judgment. But private lenders can continue to sue borrowers who default on their private student loans.
Additionally, the Extended Relief does not cover borrowers in good standing on their FFEL, Perkins, or private student loans. The CARES law suspended all payments and interest on government owned federal student loans in good standing; these relief provisions were not limited only to borrowers in default. But Biden’s current expansion is limited only to in default FFEL loans. Borrowers with FFEL loans in normal repayment will have to continue their payments and interest will continue to accrue.
Advocates for student loan borrowers criticized the administration for not going any further. “Today’s announcement will help some borrowers who had been ignored by Washington, even as the pandemic grew and the economy collapsed,” Student Borrower Protection Center executive director Seth Frotman said, in a press release. Unfortunately, this action is incomplete – it does nothing for the more than 5 million FFEL commercial borrowers who are not in default. Borrowers with FFEL commercial loans need Washington to stop drawing arbitrary lines that leave them behind. 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 high time they used it. “
The administration’s latest move is just the most recent in its efforts to address the student loan crisis that many Americans are facing. In addition to extending the CARES law student loan moratorium and expanding collection protections to include FFEL loans, Biden also enacted his sweeping new stimulus package that exempt from tax the cancellation and exemption of a student loan under federal law until 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 can allow colleges to use stimulus funds to cancel institutional student debt in certain limited situations. And the Biden team yesterday announced a relaxation of bureaucratic rules for disabled student loan borrowers who could allow 41,000 borrowers to get their student loan repaid after reinstatements.
While advocates for student loan borrowers have offered lukewarm support for the administration’s efforts, they insist Biden needs to take much stronger action to bring lasting relief to millions of student loan borrowers. Borrower advocates have argued for months that the best way forward to resolving student debt is not gradual reform, but generalized student loan forgiveness.