- 23 Democrats asked the Education Department how it would protect borrower wages when student loan payments resume.
- They cited how nearly half of borrowers with delinquent loans cannot get back to good creditworthiness.
- Democrats fear that borrowers will be âplunged back into repaymentâ in October without long-term help.
- See more stories on the Insider business page.
Even if the hiatus on student loan payments were extended beyond October, it would only be temporary. Lawmakers want to make sure the Education Department has plans for long-term borrower protection.
Massachusetts Senator Elizabeth Warren, New Jersey Senator Cory Booker and Massachusetts Representative Ayanna Pressley led 23 of their fellow Democrats to seek information from the Department of Education on practices that “hurt student borrowers” on Wednesday . More precisely, in their letter Education Secretary Miguel Cardona said lawmakers wanted to know what steps the ministry is taking to protect borrowers’ salaries and benefits when payments resume.
âEven before the 2019 coronavirus disease (COVID-19) pandemic, collections on delinquent student loans were catastrophic for defaulting borrowers, who saw their salaries, tax repayments, and even Security checks. social confiscated, in addition to being forced to pay exorbitant fees. “the Democrats wrote.
The letter cited a report of the Center for American Progress which found that 45% of borrowers in default have not found a way to get their loan back to good credit, making it more difficult to access housing and employment opportunities.
Democrats added that although the CARES Act initially suspended student loan payments during the pandemic, the Education Department and the Treasury Department still “improperly seized and withheld” more than $ 200 million from approximately 390,000 borrowers during this period.
“The ministry’s failure to fully implement the moratorium on collections raises concerns about how it will handle the next scheduled resumption of collections and payments on October 1, 2021,” the letter said.
The education ministry has also said it will reimburse any refund of wages or taxes received after the start of the pandemic, but more than 23,000 borrowers whose wages have been garnished have yet to receive a refund because the ministry did not have the correct borrower addresses on file, according to the National Consumer Law Center, which is why Democrats are emphasizing the importance of good preparation for the transition to paying off student loans.
Many Democrats who signed the letter are also calling for the payment break to be extended at least until March next year, as borrowers and services have said they are not ready to resume payments. payments in just a few months.
Lawmakers wrote: “As we approach the currently planned end of the suspension of payments and collections, we fear that we will put borrowers back into an unsustainable financial position, causing long-term damage to their credit and financial stability. and an unnecessary drag. our economy is recovering. “