Students, borrowers, states, and colleges need additional emergency help to weather the twin crises of pandemic and recession. Congress should build upon the CARES Act to include the below.
Extend Duration and Expand Coverage for Monthly Payment Relief
Current emergency benefits for federal student loan borrowers are set to expire at the end of 2020. Rather than setting the benefits to end on an arbitrary date, lawmakers should tie the benefits to a clear economic indicator. Policymakers must also expand which loans are covered by emergency relief — commercial FFELP loans and campus-based Perkins loans, which account for nearly 11 percent of the federal loan portfolio (in dollar terms), are not currently covered. We support bipartisan legislation (S.4237) to address this coverage gap. Congress should also direct private lenders to provide additional relief (such as extended payment pauses or interest reductions) for private loan borrowers.
Once the emergency benefits end, millions of borrowers will need to transition back into repayment. Past disaster-related forbearance for hurricanes and wildfires have contributed to jumps in delinquency and default after the forbearances ended, demonstrating the difficultly inherent in transitioning large groups of borrowers from non-payment to active repayment.
To prevent this, borrowers should be given a six-month grace period from delinquency, default, and collections to allow servicers adequate time to successfully transition them back into repayment after the emergency benefits expire. Congress should also build on the borrower-communication requirements in the CARES Act by providing more explicit direction and resources to the Education Department to facilitate a smooth transition of borrowers back into repayment, including close oversight of contracted servicers, once the pause payment period ends.
Provide Additional Loan Relief for Distressed Borrowers
Congress should discharge the federal student loans of students who are covered by government findings of wrongdoing (such as students who attended Corinthian Colleges and ITT Technical Institute). Addressing some of the outstanding issues regarding borrower defense claims would serve as a small but important economic stimulus for some of the most vulnerable borrowers.
In addition, far too many borrowers have attempted college to improve their prospects only to be left stuck in the same — or worse — economic condition with unmanageable debts and facing the financial devastation of default.
There are a number of steps Congress should take to provide relief to such borrowers, including restoring bankruptcy protections for both federal and private student debt and reinstating a statute of limitations on the collection of federal student loan debt by discharging all loans that have been in repayment for 30 years or longer.
Deliver Emergency Relief to States and Colleges
Colleges are facing extreme uncertainty and will need significant help in recovering from both the immediate and long-term effects of the coronavirus outbreak. Congress should immediately provide significant additional funding to enable states to shore up public colleges and universities. State higher education budgets are already being hit hard as states must fund urgent health needs and weather a steep decrease in revenue as a result of the economic downturn.
These funds are desperately needed and will enable states to (1) cover operational costs at public institutions and avoid steep tuition hikes at the very time that families can least afford it and (2) fill critical gaps left by enrollment drops or tuition discounts provided to students forced to shift from campus-based to online-only education.
