- The Department of Education is negotiating reforms to the student loan industry.
- Senator Elizabeth Warren joined 6 of her colleagues in calling for specific reforms to be implemented.
- These include simplified loan cancellation programs and simpler repayment plans.
The Department of Education is currently in negotiations to implement reforms in the student loan sector, and a group of Democratic lawmakers have some ideas on what these reforms should include, particularly with regard to the cancellation of the loans. ready.
On Monday, Massachusetts Senator Elizabeth Warren joined Senate Majority Whip Dick Durbin and five other Senate Democrats in sending a letter to Education Secretary Miguel Cardona regarding protections for student loan borrowers. The education ministry has already started implementing some reforms, such as a recent overhaul of the Public Service Loan forgiveness program (PSLF), and lawmakers want to ensure the ministry will continue to build on it. these changes.
“The ministry’s initial proposals to simplify and expand student loan release options and repayment plans were a positive and essential step forward in helping borrowers get the help they need and deserve. “the Democrats wrote. âWe commend the Ministry for its work alongside negotiators to provide additional student debt relief and protection. “
Here are the four changes the seven lawmakers demanded of Cardona:
- Create a new Income Based Repayment Plan (IDR) to simplify the process for student loan borrowers. Lawmakers suggest removing enrollment from all existing IDR plans and creating a single plan for all borrowers wishing to enroll. This new plan would have a simple name, a repayment period of no more than 20 years, and would guarantee eligible borrowers greater access to loan forgiveness.
- Speed ââup the loan forgiveness process for borrowers defrauded by for-profit schools. Veterans and Pell Grant recipients should be eligible for release, as well as direct loan borrowers who are already eligible.
- Eliminate restrictions on exits from closed schools related to the transfer of the borrower to another institution. All students who attended a school when it closed, or 180 days before, should be eligible for loan waiver whether or not they end up continuing their education at another school.
- The recent reforms of the PSLF should be sustained. The ministry instituted a waiver until Oct. 31, 2022 to allow additional repayment plans to qualify for the PSLF, which cancels civil servants’ student debt after ten years. Lawmakers are calling for the waiver to be made permanent.
The Department of Education has taken a number of steps this year to address shortcomings in the student loan industry. For example, Cardona has so far canceled $ 11.5 billion in student debt for targeted borrower groups, like the disabled, and it has reversed a methodology created by Education Secretary Betsy DeVos, which denied relief to 99.4% of defrauded borrowers.
More recently, the department announced an overhaul of the PSLF that will bring 550,000 borrowers closer to relief, but as lawmakers have noted, these reforms are temporary and the 45 million borrowers across the country who carry student debt. $ 1.7 trillion is in need of permanent relief.
Meanwhile, the pandemic pause on student loan payments lifts in less than 100 days, and Warren continues to demand $ 50,000 for student debt cancellation to provide relief to borrowers as soon as possible.
“At the end of the day, the student loan system is broken,” Warren told Insider, adding that the best way to protect borrowers “is to write off student debt, so that no borrower is held hostage. by companies taking advantage of their financial distress “.