Vermont Business Magazine Scott Giles, president and CEO, Vermont Student Assistance Corp commented today on the US Department of Education’s expanded ‘pause’ on federal student loan interest and collections for defaulted FFEL loans.
“COVID-19 has created significant challenges for many Vermont students and their families. Over the past year, we have worked with thousands of Vermonters to help them obtain the help they needed to manage their student loan debt.
“We have also been actively advocating with the Vermont delegation and with the Department of Education to provide additional relief to borrowers in the legacy FFEL program. This past week the US Department of Education made the decision to provide additional support to FFEL borrowers who have defaulted on their student loans.
“I want to thank the Vermont delegation – Senators Patrick Leahy and Bernie Sanders and Congressman Peter Welch – for their tireless efforts on behalf of Vermont borrowers. This is an important step forward for equity that was denied to some Vermonters simply by the virtue of when they took out their federal student loans. Just as important—this relief is targeted to aid borrowers who have the greatest immediate need.
“We remind Vermont borrowers who have questions and need additional information, VSAC can help. Whatever your situation, and whether you are a customer of ours or not, we’ll help get you headed in the right direction.”
Department of Education Announces Expansion of COVID-19 Emergency Flexibilities to Additional Federal Student Loans in Default
On March 30, 2021, the US Department of Education (Department) announced an expansion of the pause on federal student loan interest and collections to all defaulted loans in the Federal Family Education Loan (FFEL) Program. This action will help more than one million additional borrowers burdened by debt during the COVID-19 emergency.
“At a time when many student loan borrowers have faced economic uncertainty, we’re ensuring that relief already provided to borrowers of loans held by the Department is available to more borrowers who need the same help so they can focus on meeting their basic needs,” said Education Secretary Miguel Cardona. “Our goal is to enable these borrowers who are struggling in default to get the same protections previously made available to tens of millions of other borrowers to help weather the uncertainty of the pandemic.”
Under the FFEL Program, private lenders made federal student loans to students and guaranty agencies insured these funds, which were, in turn, reinsured by the federal government. After these loans enter default, they are transferred from the lender to the guaranty agency. While some FFEL Program loans are now held by the Department because they were purchased by the federal government during the financial crisis over a decade ago, many others remain with private entities.
Today, the Department is announcing that it will expand the 0% interest rate and pause of collections activity to 1.14 million borrowers who defaulted on a privately-held FFEL Program loan. This action will protect more than 800,000 borrowers who were at risk of having their federal tax refunds seized to repay a defaulted loan. This relief will be made retroactive to March 13, 2020, the start of the COVID-19 national emergency.
The Department will work to automatically return any tax refunds seized or wages garnished over the past year. Borrowers who made voluntary payments on any of these loans during the past year will have the option to request a refund of those amounts. The Department will also work with the guaranty agencies, who hold these defaulted FFEL Program loans, to implement the 0% interest rate for these borrowers.
In addition, any of these loans that went into default since March 13, 2020, will be returned to good standing. The guaranty agencies that hold those loans will assign them to the Department and request that the credit bureaus remove the record of default.
This action builds upon steps already taken by the Biden-Harris Administration to help federal student loan borrowers. Those steps include pausing student loan interest, repayment, and collections activity for tens of millions of borrowers with loans held by the Department through Sept. 30, 2021. The Department also requested a waiver from the Small Business Administration so that individuals—despite currently or previously defaulting on federal student loans or previously being delinquent on payments—will still be eligible for a Paycheck Protection Program loan and related loan forgiveness. The waiver immediately helped nearly 30,000 small business owners.
Source: VSAC 4.5.2021