DeVos grants brief reprieve to borrowers
Education Secretary Betsy DeVos’ announcement on Friday evening excusing student loan borrowers from making payments for another month, until February 1, granted a stay of millions of people who had had to start paying off debts again in less than a month, in the midst of the pandemic-induced recession.
But it was only a brief respite – “a quick breath of fresh air,” said Kyle Southern, director of higher education policy and advocacy for Young Invincibles, who has been pushing for more time. to borrowers before re-making payments.
And advocates for those with student loans, the group representing college financial aid administrators and other policy experts have said the stay is not long enough. And the timing is such that it could leave a mess for President-elect Joe Biden when he takes office on January 20, less than two weeks before borrowers have to start making payments again.
“Good. But it would be more meaningful to borrowers for Congress to extend student loan suspensions until at least September 2021,” the Democratic House education committee tweeted after the announcement.
A spokesperson for the Department of Education did not return an email asking why DeVos extended the repayments hiatus by just one month. But in a statement announcing the extension, DeVos appeared to claim that it was not the department’s role to decide how long it would continue to exempt borrowers from making payments, but that by issuing the extension it was giving the Congress an additional month to act.
“The overtime also allows Congress to do its job and determine what action it deems necessary and appropriate,” DeVos said. “It is Congress, not the executive, that is in charge of student loan policy.”
There is no doubt that the one-month reprieve has been well received by borrowers. In August, President Trump, acknowledging that many find it difficult to make payments after becoming unemployed or seeing their wages drop during the recession, exempted borrowers from having to make interest-free payments until December 31st.
But as that date approached, with the country’s economy still in shock, borrower advocacy groups, as well as those like the American Council on Education, which represents colleges and universities, called on DeVos excuse borrowers from having to pay for a longer period of time, even up to another year.
A Pew poll in August and September found that nearly 60% of borrowers would find it somewhat or very difficult to start paying off their student loans again.
Many advocates were disappointed when DeVos spoke at a financial aid conference last Tuesday and did not mention the looming crisis or announce an extension.
Still, Terry Hartle, ACE’s senior vice president for government relations, welcomed the extension when it was announced three days later. The association was “delighted,” he said. “Millions of Americans will benefit.”
DeVos, in a statement, said: “The coronavirus pandemic has presented challenges for many students and borrowers, and this temporary pause in payments will help those who have been affected. “
Interest will continue to not accrue on the debt, the ministry said. Non-payments will continue to count towards the number of payments required under an income-based repayment plan, loan rehabilitation agreement, or civil service loan forgiveness program.
By extending the payment break until Biden takes office, DeVos is also setting up a scenario where the new administration could decide to exempt borrowers from having to make payments again for months more.
“That sound you just heard was that all student loan payments were probably on hold until at least next September. This month-long hiatus gives the Biden administration a chance to extend the hiatus once she takes office, “Robert Kelchen, assistant professor of higher education at Seton Hall University, observed on Twitter.
But there could be problems. By the time Biden is sworn in on Jan.20, loan managers will have already sent out invoices to borrowers who will have to resume payments on Feb.1, said Scott Buchanan, executive director of the Student Loan Servicing Alliance.
Should Biden decide to let borrowers withhold payments in February, duty officers would have to scramble over the next 11 days to notify millions of borrowers that they don’t have to pay their February bill, respond. calls from confused borrowers and cancel borrowers’ automatic payments. , Buchanan said.
“I have no doubts that repairers will get there,” he said. “But there could be hiccups. “
Justin Draeger, president of the National Association of Student Financial Aid Administrators, also predicts problems: “We are relieved to finally have an extension of aid which has clearly been needed for weeks, but to extend it only until January 31. is logistically problematic, given the ramp-up time required to give borrowers accurate and timely information, ”he said.
“The one-month extension certainly provides short-term consistency, but does not solve the problem of effectively reactivating the system and ensuring borrowers do not fall through the cracks,” said Sarah Sattelmeyer, director by Pew Charitable. Trust’s Student Loan Program.
Despite DeVos’ temporary reprieve for borrowers, Draeger and others said Congress still needs to excuse payments longer because it plans to add more COVID-19 relief funds as part of the federal budget than it does. ‘it must pass on Saturday to avoid a federal government shutdown. This would give agents and borrowers more time to prepare.
Others have also said that even after being exempted from making a payment in January, the economy will likely still be in a recession and many borrowers will need more time before resuming their payments.
“Thousands of people with student loans tell us they’re terrified of resuming payments on January 1. They see COVID-19 cases skyrocket and financial uncertainty grow during the holiday season For them, this is small but good news, “said Natalia Abrams, executive director of the Student Debt Crisis advocacy group.
“However, we know millions of people will still not be financially secure enough to resume payments at the end of January. The COVID-19 pandemic has caused lasting damage to families and the economy. Americans need help. long-term student loan relief, not another temporary fix, and they call for debt cancellation that offers a permanent solution. “