Debt collection agency7/8/2023 That is an increase from the previous policy of writing off small balances under $25.īut the cash-strapped budget for restarting payments remains a major obstacle for the administration. For example, the Education Department last month directed loan servicers to stop collecting on borrower balances that total $100 or less and to write off those debts, according to one of the documents. The administration is looking at a range of other policies designed to make the student loan system more borrower-friendly amid the looming restart of payments. But they are now considering extending that flexibility to borrowers for as long as a year after repayment starts, according to two people familiar with internal discussions, who also cautioned that the plans are in flux and could change. Officials had previously settled on a grace period for the first 90 days after payments are due. In addition, Education Department officials are planning a “safety net” period in which borrowers aren’t penalized for missing payments once repayment begins, according to three people familiar with the discussions. Officials are eyeing October as the first month in which any borrower will be required to make a payment, the documents show, noting the requirement that borrowers receive a billing statement at least 21 days in advance of their due date. The Biden administration has said publicly that the moratorium on payments will end this summer, with payments resuming 60 days after either the Supreme Court rules on student debt cancellation or June 30, whichever comes first.īut the Education Department is also contemplating a transition period that would push repayment well into the fall.ĭepartment officials have told loan servicers to prepare to resume charging interest on federal loans in September, according to documents obtained by POLITICO under public records requests. “Never has this ever been done where - depending on the decision of the Supreme Court - up to 43 million borrowers are going to start repaying,” Cardona said. “We see what’s about to unfold, so let’s just prevent it now and just step in and take preventative measures,” he said.Įducation Secretary Miguel Cardona told House appropriators during a hearing last week that restarting payments will be an “unprecedented” undertaking that requires an “all hands on deck” approach. Bass urged lawmakers to find a way to add money for administering student aid programs even before Congress debates government-wide funding this fall. “It is a slow-moving car crash,” said Jared Bass, senior director for higher education at the Center for American Progress and a former Democratic appropriations staffer.
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