Cardin, Democratic Colleagues Urge DeVos to Help 8.2 Million Federal Student Loan Borrowers Currently Unable to Access Relief

Cardin, Democratic Colleagues Urge DeVos to Help 8.2 Million Federal Student Loan Borrowers Currently Unable to Access Relief

October 21, 2020

8.2 million federal student loan debtors at present can not entry crucial aid made obtainable by the CARES Act, together with a freeze on all funds, curiosity, and collections


In a letter, Murray and 33 Senate Democrats urge DeVos to make use of her current authority to verify these struggling debtors don’t fall by means of the cracks


Senator Murray: “The more than eight million student loan borrowers falling into donut holes of critical relief have missed out on needed benefits and suffered unnecessary complexity and confusion for more than six months.”


WASHINGTON  Today, U.S. Senator Ben Cardin (D-Md.) and 33 Senate Democrats despatched a letter urging Secretary of Education Betsy DeVos to make sure all struggling federal student debtors can achieve entry to essential federal aid.

Since March, the CARES Act has supplied forbearance, waived curiosity, and halted collections for debtors whose student loans have been instantly held by the U.S. Department of Education. But, in response to new info supplied to Senator Murray by the Department, 8.2 million federal student loan debtors at present can not benefit from this aid, as a result of some or all of their loans don’t qualify. Of these debtors, 4.4 million individuals are not receiving any aid, and three.8 million individuals have a mixture of loans that qualify and people that don’t. To make sure that these debtors don’t proceed to face pointless monetary struggles and confusion, the senators urged Secretary DeVos to take rapid motion to assist them qualify for much-needed aid.

“The more than eight million student loan borrowers falling into donut holes of critical relief have missed out on needed benefits and suffered unnecessary complexity and confusion for more than six months,” wrote the senators within the letter. “It is essential that the Department immediately begin the targeted outreach and take the actions we are requesting.”

In the letter, the senators pressed Secretary DeVos to right away attain out to debtors at present lacking out on aid and assist them consolidate their loans into qualifying loans. They additionally urged Secretary DeVos to make use of her administrative authority to enhance the consolidation course of for debtors by waiving restrictions and penalties through the nationwide emergency.

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In addition to Senator Cardin, the letter was signed by Senators Tammy Baldwin (D-Wis.), Richard Blumenthal (D-Conn.), Cory Booker (D-N.J.), Sherrod Brown (D-Ohio), Patty Murray (D-Wash.), Bob Casey (D-Pa.), Catherine Cortez Masto (D-Nev.), Tammy Duckworth (D-Ill.), Dick Durbin (D-Ill.), Dianne Feinstein (D-Calif.), Kirsten Gillibrand (D-N.Y.), Martin Heinrich (D-N.M.), Mazie Hirono (D-Hawaii), Tim Kaine (D-Va.), Angus King (D-Maine), Amy Klobuchar (D-Minn.), Patrick Leahy (D-Vt.), Edward Markey (D-Mass.), Jeff Merkley (D-OR), Chris Murphy (D-CT), Jack Reed (D-RI), Jacky Rosen (D-NV), Bernie Sanders (D-VT), Brian Schatz (D-Hawaii), Chuck Schumer (D-N.Y.), Jeanne Shaheen (D-N.H.), Tina Smith (D-Minn.), Debbie Stabenow (D-Mich.), Tom Udall (D-N.M.), Chris Van Hollen (D-Md.), Elizabeth Warren (D-Mass.), Sheldon Whitehouse (D-R.I.), Ron Wyden (D-Ore.).


The full letter is under and HERE.


Dear Secretary DeVos:

We write to ask that you simply take rapid steps to assist federal student loan debtors who’ve been impacted by the COVID-19 pandemic. Although the Coronavirus Aid, Relief, and Economic Security (CARES) Act and up to date administrative motion to increase it are mechanically offering forbearance, waiving curiosity, and halting collections on student loans held instantly by the U.S. Department of Education (“Department”) till not less than December 31, 2020, this aid doesn’t cowl all federal student loan debtors. The Department ought to take swift motion to assist debtors with not less than one qualifying loan achieve entry to full protection.

According to info supplied by the Department, 8.2 million federal student loan debtors wouldn’t have full aid as a result of they fall into an entire or partial “donut hole.” Of these, 4.4 million debtors should not receiving any aid below the CARES Act or administrative extension, and three.8 million debtors have a mixture of loans that qualify and people that don’t, leading to confusion and pointless monetary hurt for them throughout a interval of widespread financial disruption. All federal student loan debtors ought to have entry to the identical aid.

The Department has quite a few instruments at its disposal to contact the three.8 million debtors in a partial donut gap and assist them get all of their loans lined by the CARES Act aid. For instance, the Department can direct student loan servicers to proactively contact debtors who fall into the partial donut gap and assist them consolidate loans not held by the Department into Direct Loans, which qualify for aid. The Department also can enhance the method of consolidation for debtors by means of administrative motion.

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The various aid choices which were supplied by loan holders to some debtors within the donut holes have been woefully insufficient. Temporary forbearance choices that have to be repeatedly requested by debtors are far inferior to automated and prolonged aid. Many debtors additionally proceed to accrue curiosity on these non-covered loans, probably costing them lots of or 1000’s of {dollars}. Consolidation is an easy resolution to assist some non-covered debtors get entry to the identical advantages obtainable to these with non-federally-held loans. A borrower with a commercially-held FFEL, school-held Perkins, or Public Health Service Act loan can usually consolidate such loan right into a Direct Loan to acquire the automated administrative forbearance, curiosity waiver, and halt to collections and damaging credit reporting. 

In 2012, the Department efficiently spurred widespread take-up of a “special consolidation” choice by debtors holding each business FFEL and Direct Loans. This time-limited alternative provided a 0.5 p.c rate of interest discount for debtors who participated. In distinction, simply six months of aid equal to the CARES Act affords a better profit to a typical borrower over the lifetime of a loan. The Department has a chance to comply with the identical playbook and unlock aid for hundreds of thousands of debtors.

The holders of non-covered loans have supplied inadequate justification for failing to proactively notify debtors of consolidation. While debtors usually obtain a trivial roundup of their rate of interest to the closest one-eighth of a p.c from consolidation, all curiosity is at present being waived for lined loans and the worth of this curiosity waiver would exceed the price of the roundup for the overwhelming majority of debtors. Additionally, whereas debtors may lose some credit towards income-driven compensation (IDR) forgiveness in the event that they consolidate a loan that they had beforehand been paying below an IDR plan, they don’t have to consolidate loans which are already enrolled in IDR. Further, most debtors should not enrolled in an IDR plan, that means they might see no change of their timeline for IDR forgiveness as a result of they don’t have one. Finally, whereas a restricted variety of debtors could have already consolidated all of their loans and are ineligible to consolidate once more, debtors have quite a lot of exceptions to the restriction. For instance, debtors want to turn into eligible for Public Service Loan Forgiveness can consolidate greater than as soon as, as can all 1.2 million debtors with a business FFEL loan at present in default. 

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Commercial FFEL debtors who’ve defaulted are disproportionately harmed by the disparate therapy of non-covered loans; whereas defaulted debtors with lined loans have been granted a reprieve from compelled collections, these debtors stay topic to wage garnishment and the offset of public advantages, together with Social Security funds.

Most importantly, the Department can simply take administrative motion to droop consolidation restrictions and penalties through the nationwide emergency, such because the limitation on consolidating as soon as, the reset of the forgiveness clock, and interest-rate roundup, utilizing the identical authority that was utilized to implement the President’s August 8 Executive Order. Under Section 2(a)(1) of the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, the Secretary could “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV.” The Department ought to use this authority to waive all limitations to consolidation.

Additionally, the Department ought to encourage the business FFEL entities, establishments holding Perkins Loans, and the Secretary of Health and Human Services, which collectively maintain the 4.4 million loans utterly un-covered by present aid, to provoke an analogous outreach marketing campaign to their debtors. As Secretary, you keep vital authority and management over these entities, together with the continuing cost of taxpayer subsidies. You ought to rapidly ask loan holders requesting to tell debtors of their choice to consolidate as a method to expediently obtain the aid afforded by the CARES Act.

The greater than eight million student loan debtors falling into donut holes of crucial aid have missed out on wanted advantages and suffered pointless complexity and confusion for greater than six months. It is important that the Department instantly start the focused outreach and take the actions we’re requesting. Thank you to your consideration to this crucial matter.