A new memo from the U.S. Department of Education details the Biden administration's efforts to prevent a surge in student loan defaults. The memo outlines strategies to help borrowers stay current on their payments as collection activities resume after a Covid-era pause.
In a new U.S. Department of Education memo obtained by CNBC, a top official lays out the steps the Biden administration has taken to stave off a default crisis among federal student loan borrowers. There were around 7.5 million federal student loan borrowers in default, the Education Department said in 2022. This year, for the first time in roughly five years, borrowers who have defaulted on their federal student loan debt will face collection activity, including garnishments.
The memo, dated days before the Trump administration takes over, details steps the Biden administration has taken to stave off a default crisis among federal student loan borrowers. It outlines strategies for the department to help student loan borrowers stay current as collection efforts resume this year. 'It is critical to continue the initiatives and fully implement the actions outlined in this memo, as the Department plans to resume default penalties and mandatory collections later this year,' U.S. Undersecretary of Education James Kvaal writes in the memo. Education Department said After the Covid-era pause on federal student loan payments expired in September 2023, the Biden administration offered borrowers a 12-month grace period. During that time, they were shielded from most of the consequences of falling behind on their payments. The relief period expired on Now federal student loan borrowers in default may see their wages garnished starting in October of this year, according to the Education Department. Meanwhile, Social Security benefit offsets could resume as early as August. The Department of Education memo directs its Federal Student Aid office to continue the Biden administration's work to avoid defaults. That includes making it easier for borrowers to enroll in affordable repayment plans, such as letting borrowers authorize the department to obtain their income information from the IRS and to automatically enroll borrowers in an income-driven repayment plan if they become 75 days delinquent on their loans. (IDR plans base a borrower's monthly bill on their discretionary income and family size, and some are left with a $0 monthly bill. Any remaining debt is canceled after a certain period, typically 20 or 25 years.) Borrowers should also be 'screened for other forgiveness opportunities before they formally default,' the memo says. The memo also encourages the Education Department to explore options for increasing the current interest rate incentive to get borrowers to sign up for automatic payments to their student loan servicer. As of now, borrowers can typically get an 0.25 percentage point reduction in their interest rate by doing so. plan'and have a pathway to forgiveness,' the memo says. Currently, federal student loan borrowers need to exit default before they can access any of the income-driven repayment plans, including the IBR. According to the memo, the Biden administration has eliminated most collection fees on federal student loans. In early 2024, it also took steps to protect a higher amount of people's Social Security benefits from the department's collection powers. When the consequences of defaults resume, those with a monthly Social Security benefit under $1,883 can protect those benefits from offset, compared with the current protected amount of $750 in place today. 'Available data suggest that these actions will effectively halt Social Security offsets for more than half of affected borrowers and reduce the offset amount for many others,' the memo says.
STUDENT LOANS DEFAULT BIDEN ADMINISTRATION DEPARTMENT OF EDUCATION COLLECTION ACTIVITIES INCOME-DRIVEN REPAYMENT PLANS
United States Latest News, United States Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
Biden Administration Announces $1.25 Billion in Military Aid to Ukraine Before Trump Takes OfficeThe Biden White House is set to announce an additional $1.25 billion in military assistance to Ukraine ahead of the incoming Trump Administration. The package includes munitions for various air defense systems, as well as artillery rounds. This announcement follows a previous $988 million aid package and reflects the Biden administration's commitment to supporting Ukraine before the end of its term.
Read more »
O'Donnell: Biden Administration's Hunter Biden Response a Hurricane Without RainMSNBC host Lawrence O'Donnell criticizes the Biden administration's response to the Hunter Biden investigation, calls it a politically motivated distraction, and analyzes Trump's role in the January 6th Capitol riot and his appointment practices.
Read more »
5 steps the new Trump administration must take to make America healthy againThe new presidential administration has an opportunity to enact meaningful reforms that prioritize patient care, personal responsibility and the strength of American innovation.
Read more »
Student loan borrowers should take these steps before presidential administration changesThe country’s roughly 40 million federal student loan borrowers should brace for change when President Joe Biden exits office toward the end of the month.
Read more »
Hostage Crisis: History Offers Lessons as New Administration Takes OverCan the transition to a new US administration bring resolution to the ongoing hostage crisis in Gaza? The text draws parallels to the 1980 Iran hostage crisis, analyzing its impact on President Carter's re-election bid and offering insights into the complexities of hostage negotiations.
Read more »
Tech Industry Taps to Fill Trump Administration, Nordstrom Family Takes ControlPresident-elect Donald Trump is recruiting heavily from the tech industry to staff his administration, appointing prominent figures from venture capital firms like Andreessen Horowitz. Meanwhile, the Nordstrom department store chain is going private after a deal led by the founding family and the Mexican retailer El Puerto de Liverpool.
Read more »