Warren and Sanders call for 8 million student loan borrowers to be exonerated
Senator Elizabeth Warren (D-Massachusetts) has called on the Education Department to lift student loan borrowers out of default before payments start again in February.
More than 8 million people are currently in default on their student loans, according to Warren’s letter to Education Secretary Miguel Cardonas, and more than 93% of those who were in default before the pandemic still couldn’t pay off their debt. Warren writes that the agency has the potential to ease a huge burden on borrowers and potentially help the economy as a whole.
âAs the Department works to correct past failures of the student loan program, it also has the potential to ease a significant burden on borrowers by developing a debt cancellation policy for borrowers in default since A long period. ” the letter reads. âAllowing payments and collections to resume without taking these steps to protect defaulting borrowers would jeopardize our economic recovery. “
The letter was signed by eight of Warren’s fellow Democrats, including Senators Bernie Sanders (I-Vermont) and Ed Markey (D-Massachusetts).
When student loan repayments restart, millions of borrowers will already be in arrears; In addition to other financial constraints, these borrowers will also face collection tactics that could lead to wage garnishment or withholding of their child tax credit, as the letter points out. This could have a particularly disproportionate effect on low-income borrowers, many of whom have been left behind as the economy recovers from the impacts of COVID.
Senators are also urging the education ministry to create a program that would automatically cancel loans for people who have been in default for a long time. They cite the statute of limitations on other types of debt like medical debt, which can range from 3 to 10 years depending on the state, lawmakers write.
Many borrowers who default on their loans therefore stay for the long term. A 2018 study by the American Enterprise Institute found that about 30 percent of those in default remain in default for more than five years, and attempts to collect this debt are often unsuccessful and “do not constitute a profitable use of taxpayers’ money,” according to the legislators.
The implementation of default and loan cancellation would have a huge impact on borrowers, who may struggle to find housing, employment or new educational opportunities, lawmakers say. âRemoving borrower default records will improve borrowers’ credit scores and, therefore, their economic well-being. “
Warren and his Democratic and Progressive allies have urged the Biden administration to write off up to $ 50,000 in student debt throughout Joe Biden’s first year in office, saying he has the broad authority to do so.
Biden said during the election campaign that he would write off $ 10,000 in debt for student loan borrowers, but he has so far failed to keep that promise. Indeed, his administration has instead I hid a student loan forgiveness note prepared by the Department of Education earlier this year for months.
Warren also pleaded in recent weeks for student loan managers to ensure that once payments are restarted borrowers move smoothly to new managers. Three servers have announced in recent months that they are giving up their contracts with the government and, as Warren pointed out, these servers have a habit of making mistakes, leaving little room for trust when borrowers move on to debt. new services.