October 18, 2021
BIDEN TEAM WEIGHS HOW TO RESTART STUDENT LOAN PAYMENTS: The Biden administration is developing plans for how it will resume collecting federal student loans early next year, when the government’s pandemic-related pause on monthly payments for tens of millions of Americans ends.
— The Education Department is considering proposals that would give borrowers more flexibility, as they face student loan bills for the first time in nearly two years. The plans, which are not yet finalized, are aimed at averting a surge in delinquencies when payments resume in February.
— Key context: The government’s $1.6 trillion student lending apparatus has been largely been frozen since March 2020, and turning it back on will be an unprecedented logistical challenge. It will also be full of political pitfalls as progressives urge the administration to focus instead on sweeping debt forgiveness.
— Internal documents obtained by POLITICO under a Freedom of Information Act request outline details of the department’s “return to repayment” strategy, internally dubbed “R2R.” Several people familiar with the department’s planning also described other policies that are under consideration by the administration.
Here’s a rundown of what’s on the table when payments resume in about three months:
— Grace period: Department officials have instructed loan servicers to create a borrower “safety net” for the first three months after their first payment is due next year, according to internal documents. Borrowers who miss a payment during that initial 90-day period will not take a hit on their credit reports. Those borrowers will instead be automatically placed in a forbearance and be still considered current on their loans.
— Targeted outreach: The department is planning direct outreach to certain “at-risk” groups of borrowers, such as those who were delinquent before the pandemic, never graduated from college or only recently began repaying their loans.