Education Secretary Urged to Extend Suspension of Federal Student Loans
With the number of COVID-19 cases on the rise, 77 advocacy groups, including CFA, sent a letter to Secretary of Education Betsy DeVos last month urging her to extend the suspension of payments on federal student loans through at least September 2021. The current suspension on federal student loans and the halt on collections, designed to address the economic repercussions of the COVID-19 pandemic on student borrowers, is set to expire on December 31, 2020 if the government fails to extend these protections.
In their letter, the groups pointed out that, “current economic projections, coupled with the spike in the average number of new coronavirus cases per day, indicate our nation will remain in a state of emergency for many months ahead.” In order to reflect this trajectory, the groups called on the Department of Education to use the authority granted to them under the Higher Education Act to meaningfully solve the student debt problem.
“At the very least, by extending the repayment pause, your action can support millions of borrowers — particularly borrowers of color, who are disproportionately impacted by the current crises, and others experiencing significant financial distress — who need the financial support this repayment pause brings to their household budgets,” the groups stated.
While the CARES Act was intended to provide some protections to borrowers, both the Department of Education and at least one student loan servicer have violated the protections in the Act. Months after the Act’s passage, borrowers sued the Department of Education for illegally garnishing the wages of more than 54,000 borrowers, despite being prohibited by the CARES Act. Similarly, at least one student loan servicer illegally provided inaccurate information on nearly five million borrowers to credit bureaus, which then reported this information to third parties, resulting in credit scores dropping and a loss of affordable credit.
“If student loan payments resume on January first, repayment will compound the difficulty created by unprecedented labor shocks and ongoing economic hardship,” the groups wrote. “The most recent Census Household Pulse Survey showed that ten percent of adults were either ‘sometimes’ or ‘often’ without enough food to eat in the last week, and 31.9% of adults live in households where it has been somewhat or very difficult to pay usual household expenses,” they added.
“The uncertainty looming over the country’s 43 million student loan borrowers will affect the nation’s small businesses and the broader retail sector, as ongoing uncertainty about upcoming loan repayments could lead many people to hold back from the holiday shopping season that so many retailers depend on for a substantial portion of their annual revenues. Some borrowers have already started receiving notices from servicers about their payments resuming in the near future… [Extending the repayment pause] would bring both certainty and relief to the nation’s student loan borrowers. As the pandemic continues to wreak havoc, borrowers need to know they won’t be pushed over this cliff,” the groups wrote.