Over a million student loan holders seeking relief

The Biden administration is suspending collections on delinquent student loans held by more than one million borrowers, the latest in a wave of measures aimed at providing relief to adults struggling to make ends meet during the pandemic.

Decision extends relief to 1.14 million students who borrowed from a former loan program known as the Federal Family Education Loans Program and then defaulted on those loans. . This group had not been covered by previous coronavirus-related adjustments regarding collections and payment requirements.

FFEL loans are guaranteed by the federal government but held by private lenders. Some delinquent loans were purchased by the Education Department during the financial crisis more than a decade ago, but others are still held by private entities.

FFEL borrowers whose loans are held by private lenders and who are not in default are not affected by Tuesday’s announcement. A senior agency official said there were a few million borrowers in this category, and the Education Department “is still researching our options” for granting them debt relief.

The education department also set interest rates on overdue private FFEL loans at 0% on Tuesday, suspending interest payments. The suspension of collections and the adjusted interest rate are both retroactive to March 13, 2020, when the country first declared a national emergency for the Covid-19 pandemic. Any loans in default since that date will also be reinstated, which could help repair borrowers’ credit scores.

“At a time when many student loan borrowers face economic uncertainty, we are ensuring that the relief already provided to borrowers for loans held by the ministry is available to more borrowers who need the support. same help so that they can focus on their basic needs. Said Education Secretary Miguel Cardona.

According to the Department of Education, more than 800,000 FFEL borrowers were at risk of having their federal tax refunds seized to repay delinquent loans.

The government has said it will work to automatically return funds to borrowers who have previously had tax refunds foreclosed or wages foreclosed, and those who have made voluntary payments in the past year will have the opportunity to do so. refund.

The Biden administration extended to at least September 30 a general hiatus on interest payments and the collection of most federal student loans, an initiative first initiated by the Trump administration last year. He also requested a waiver from the Small Business Administration so that borrowers who failed on federal student loans or who were behind on payments could still qualify for the paycheck protection program. Also on Monday, he waived some paperwork for borrowers whose loans have been discharged due to total and permanent disability.

More than 43 million Americans collectively owe $ 1.6 trillion in federal student loans. Josh Mitchell of the WSJ explains how President Biden plans to help borrowers tackle this debt. Photo illustration: Carlos Waters (video of 1/12/21)

Write to Melissa Korn at [email protected]

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Appeared in the March 31, 2021 print edition under the title “US Provides Further Student Debt Relief.”

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