Durbin, Warren, Warnock, Colleagues Ask Department Of Education For Its Plan To Provide A "Fresh Start" To Student Loan Borrowers In Default

WASHINGTON – U.S. Senate Majority Whip Dick Durbin (D-IL) joined U.S. Senators Elizabeth Warren (D-MA), Raphael Warnock (D-GA), Cory Booker (D-NJ), Chris Van Hollen (D-MD), Richard Blumenthal (D-CT), Tammy Baldwin (D-WI), and Bernie Sanders (I-VT) in sending a letter to Secretary of Education Miguel Cardona, asking the Department of Education (ED) for details about its plan to give a “fresh start” to student loan borrowers currently in default before loan payments resume. Their letter follows ED’s recent announcement of the extension of the student loan payment pause through August 31, 2022, and its plan to provide a “fresh start” to borrowers by eliminating the impact of delinquency and default and allowing them to enter repayment in good standing. 

“More than 7 million federal student loan borrowers are currently in default on their federal student loans. A disproportionate number of these borrowers are low income, people of color, first generation college students, veterans, student parents, students with disabilities, and people who did not complete college. Removing these borrowers from default when student loan payments and collections resume means that millions will not be immediately subject to wage garnishment, tax refund withholding, and aggressive collections practices that threaten to undermine their economic security. It also makes these borrowers eligible to enroll in Income-Driven Repayment plans,” wrote the Senators. 

Many borrowers in default have been subject to collections for a decade or longer: more than 2.1 million borrowers who were in default or at least 91 days delinquent on their federal student loans at the end of 2019 had been in repayment for 20 years or more, and another 3.4 million borrowers in default or delinquent had been in repayment for between 10 to 20 years. The Senators argue that the data suggests that borrowers who are in default even after ED has garnished their wages, tax returns, Social Security, and other benefits for years may remain in default because they do not have money to be collected, not because they are choosing not to make payments.

The Higher Education Act of 1965 gives ED the clear authority to automatically remove those with federally managed loans from default status and to discharge cases of long-term default. The Senators also argue that ED could grant borrowers in long-term default further relief by enforcing the Federal Claims Collections Standards, which states that agencies may compromise a debt if “the debtor is unable to pay the full amount due in a reasonable time…or the cost of collecting the debt does not justify the enforced collection of the full amount.”

The Senators are calling on ED to answer a set of questions about its plans to implement the “fresh start” program for borrowers in default before the payment pause expires and its plans to provide further relief to borrowers in long-term default by May 5, 2022.

This week’s letter mirrors Durbin’s longstanding efforts to bring relief to student borrowers. In August 2021, Durbin introduced the bipartisan FRESH START Through Bankruptcy Act, which would restore the ability for struggling borrowers to seek a bankruptcy discharge for federal student loans after a waiting period of ten years. Unlike most other types of debt, student loans are not dischargeable in bankruptcy except in rare circumstances.

In April 2021, Durbin also joined a group of Senate colleagues in a letter urging ED to take swift action to automatically remove all federally-held student loan borrowers from default.

A full copy of the letter is available here.