Student loan repayment break extended to borrowers who have defaulted on private loans
WASHINGTON – The federal government has extended a hiatus on student loan payments that covers more than one million people who default on loans held by private lenders, the Education Department said on Tuesday.
The ministry said about 1.14 million borrowers who defaulted on their loans under the now obsolete Federal Family Education Loan Program (FFEL) will receive a payment break and a rate 0% interest.
The FFEL program has enabled private lenders to provide federally guaranteed student loans. The program ended in 2010 when the Department of Education became the sole lender of federally subsidized student loans.
President Joe Biden announced in january that federal student loan payments would remain suspended and interest rates would be set at 0% until at least September 30, extending action by former President Donald Trump’s administration. But it only applied to people in debt directly from the federal government, leaving out millions of people with private student loans.
Education Secretary Miguel Cardona said on Monday that extending the payment break would help up to 800,000 borrowers who risked having their tax refunds seized to pay off a delinquent loan.
Speaking at a press briefing Monday, White House press secretary Jen Psaki said: “This measure particularly protects 800,000 borrowers who risk having their tax refunds seized. actually a pretty big step. “
“At a time when many student borrowers face economic uncertainty, we are ensuring that the relief already provided to borrowers on loans held by the Ministry is accessible to more borrowers who need the same assistance in order to that they can focus on meeting their basic needs, “says Cardona.” Our goal is to enable those borrowers who are struggling to default to get the same protections previously made available to tens of millions of people. other borrowers to help them overcome the uncertainty of the pandemic. “
Advocacy groups called the measure a good start, but said it would help no more than 5 million other borrowers under the same program, known as the federal education loans program. family.
“This is not enough,” said Persis Yu, director of the National Consumer Law Center’s Student Loan Assistance Project. “The millions of FFEL borrowers who have not yet defaulted but who may be struggling to repay their student loans often at the expense of other vital necessities are in need of relief.”
Democratic lawmakers, along with a group of 17 attorneys general and consumer advocates have called Biden to cancel up to $ 50,000 in Federal Student Loans by Order in Council.
The president said he was supporting $ 10,000 in general forgiveness for federal student loan borrowers through Congressional action. At a CNN town hall meeting on February 16, he said he was not supporting a $ 50,000 pardon.
Psaki said Biden continued to urge Congress to write off $ 10,000 in student loan debt.
“This is something that Congress could act on, and it would be happy to sign on,” she said.
The Associated Press contributed to this story.