Several prominent Democratic legislators are asking the Department of Education (ED) about methods of collecting student debt in the face of potential wave of student loan defaults When the pandemic pause in payments expires, Yahoo Finance became aware.
“With student loan and interest payments due to resume on October 1, 2021, and a wave of loan delinquencies and defaults are likely to follow, we are concerned that the Department will resume collecting these payments and are looking for information on how ED plans to avoid long-term payments. “Financial damage to borrowers,” wrote Senator Elizabeth Warren, Massachusetts, Senator Corey Booker, New Jersey, and Rep. Ayanna Pressley, Massachusetts, in a letter sent to Education Minister Miguel Cardone on Wednesday. in the morning, according to an unsigned version obtained by Yahoo Finance.
ED did not immediately respond to a request for comment.
The letter stressed that even before the pandemic, “the fees on unpaid student loans were disastrous for defaulting borrowers, who had their wages, tax refunds and even social security checks confiscated, and were forced to pay exorbitant fees.”
The letter comes as some ED officials are urging the White House to extend the payout gap until 2020, 2 according to a recent report. report from Politiko… Warren and U.S. Senator Ed Markey (Massachusetts) wrote to the White House right on July 13 “Urge you to extend the current pause on payments and interest until at least March 31, 2022.”
Federal government action in a pandemic will lead to approximately $ 100 billion According to the Department of Education (ED) and expert analysis, the total student loan forgiveness between March 2020 and September 2021 provides financial support to approximately 45 million student loan borrowers.
Student loan balances increased by $ 29 billion to $ 1.58 trillion in the first quarter of 2021. according to the Federal Reserve System of New York… At the same time, only 6.2% of student loans were seriously delayed or defaulted in the first quarter of 2021 due to the suspension of payments and a moratorium on debt collection.
Avoiding student loan defaults is a key issue for Democrats
Failure to pay a student loan has dire and serious consequences.
Loans are foreclosed, which can lead to legal fees, withholding of wages, withdrawal of tax refunds, receiving social security benefits, damaged credit history, denied interest payments, etc.
ABOUT 7.7 million Borrower loans had not been repaid as of March 2020 and President Biden’s nominee previously headed the Consumer Protection Bureau (CFPB) warned potential “avalanche of defaults” after the expiration of the payment pause.
“As we get closer to the currently scheduled completion of the suspension of payments and fees,” the lawmakers said in a letter, “we are concerned that borrowers may again find themselves in an unacceptable financial situation, causing long-term damage to their credit and financial stability and a sudden unnecessary slowdown in our a recovering economy “.
“Removing borrowers from default status and removing their default records would bring them significant financial benefits,” the April letter said. “This will ensure that these borrowers do not face delays in wages, tax refunds, social security and surcharges after the national abstinence expires.”
The loan is recoverable under the Higher Education Act 1965. from default state making nine timely payments within 10 consecutive months. Thereafter, all records of defaults are removed from their credit history and any deduction of wages is terminated.
Warren, Schumer, and Pressly also called on Biden on multiple occasions. cancel a student loan debt of $ 50,000 immediately by order.
$ 50,000 in loan forgiveness would take off the entire debt burden of $ 36 million (84%) about 43 million borrowers keep federal debt while a $ 10,000 forgiveness cancels the debt of 15 million of these borrowers (35%).
If billing pause is canceled without cancellation in October, Warren previously said in may“We are facing a student loan ticking time bomb that could detonate millions of families from financial ruins.”
Aarti is a correspondent for Yahoo Finance. She can be contacted at email@example.com. Follow her on Twitter @aarthiswami…