Murray’s request comes as the Biden administration signals another extension. During an appearance on the “Pod Save America” podcast in early March, White House Chief of Staff Ron Klain noted President Biden would decide to use his executive power to cancel student debt “before the break expires, or he will extend the break.”
Days later, the Department of Education told student loan officers who handle its portfolio to drop sending notices to borrowers about the May repossession, according to people familiar with the matter, who spoke under the guise of anonymity because they were not authorized to speak publicly. . The department declined to comment on the guidelines, which were first reported by Politico.
The Trump administration in March 2020 gave borrowers the option to defer payments for at least 60 days as the coronavirus pandemic hit the economy. Congress then codified the reprieve into the stimulus package called the Coronavirus Aid, Relief and Economic Security Act, or Cares Act, and made it automatic. The Trump administration extended the moratorium twice before leaving office, and Biden’s White House did so twice.
Murray said she was pleased to see the administration considering another extension as there is a lot of work to do before payments resume.
The leader of the list is finalizing a new income-driven repayment plan. Existing plans determine monthly payments based on income and family size, with the promise that the balance will be canceled after 20 or 25 years. Critics of the program say it can be difficult to navigate, calculates payments unfairly and can overwhelm borrowers with rising balances when their payments aren’t enough to cover interest.
The Department of Education in December proposed a new plan, dubbed Expanded Income-Based Repayment, that would lower monthly payments and forgive unpaid interest for borrowers whose income is so low they can’t make a payment. But that only applied to undergraduate loans, not federal debt that parents or graduate students rack up, and kept a long forgiveness period in place.
The proposal was tabled by a panel of higher education experts who were unable to reach a consensus during rulemaking negotiations, leaving it to the department to move forward.
Murray said the department needs to develop a plan that is accessible to all borrowers, prevent debts from building up over time, and have a transparent enrollment process. She would like the department to end the four existing income-based plans to eliminate borrower confusion.
“We need a workable plan for all borrowers that gives them a real advantage in repaying their loans,” Murray said.
The senator is also asking the department to reinstate borrowers who were in default before the break. A provision in the Cares Act ensured that each month of suspended payments would count toward student loan forgiveness, a federal program that clears a default from a person’s credit report after nine consecutive payments.
Given the duration of the payment moratorium, the borrowers have satisfied the program conditions and should be eligible to emerge from default. But the Department for Education requires defaulting borrowers to submit an application, a step that consumer groups say will slip people through the cracks.
Advocates and lawmakers also worry that people who have rehabilitated their loans in the past and defaulted again will be excluded because the program is meant to be a one-time offering. Waiver of program requirements and restrictions would ensure that people’s negative credit histories would be erased without losing the ability to rehabilitate their loans, Murray said.
Before payments resume, she said, the department should expand a waiver that allows more civil servants to receive loan forgiveness and fill gaps in the program. Murray said the Biden administration must embrace broad-based debt forgiveness for all borrowers, prioritizing people of color, those with low incomes and those who have been stuck in repayment for more than 20 years. .
The Department of Education did not comment on the details of Murray’s request, but said the federal agency is committed to finding additional ways to expand relief and reduce indebtedness. The department says it will provide borrowers with clear and timely updates on federal student loan repayments.
Delaying the resumption of repayments and making the system more generous to borrowers is sure to meet resistance from conservatives on Capitol Hill. Although the suspension of federal student loan and interest payments initially had bipartisan support, Republicans have cooled on the policy as the economy has recovered and the cost tops $95 billion.
Democratic lawmakers and consumer groups argue that with inflation at its highest level in 40 years, borrowers are ill-equipped to start paying off student debt again.
“If we don’t extend this break and [borrowers] have another stress point in their life, so we’re not doing our job,” Murray said.
On Friday, Reps. Jim Banks (R-Ind.) and Bob Good (R-Va.) introduced a bill in the House to block the Biden administration from extending the payment moratorium. Meanwhile, Virginia Foxx (NC), the top Republican on the House Education and Labor Committee, said the administration lacks a cohesive plan to restructure the student loan system.
Overall changes in federal higher education policy are ultimately the responsibility of Congress. Lawmakers, however, have struggled to advance sweeping changes to the student loan apparatus through legislation. Ideological differences have made a bipartisan overhaul of the Higher Education Act, which governs the curriculum, elusive. The federal law, originally passed in 1965, is supposed to be renewed every five years, but was last reauthorized in 2008.
Murray, who has been a driving force behind several reauthorization attempts, said the department can move faster than Congress to implement the revisions she is calling for.
“We have a lot to do right now and I don’t want to…spend years working on the process,” Murray said. “That’s something we need to fix now.”