Report Shares Details of Student Loan Restart Proposals

The Department of Education is considering proposals that would give borrowers “new flexibility” like initial grace periods when its moratorium on student loan payments ends on January 31, according to a published report.

Individuals with federal student loans have not had to make payments since the COVID-19 pandemic hit the United States in the Spring of 2020. That payment pause is set to expire on January 31, and the Education Department wants to make sure that the millions of borrowers who are going to have to start making payments again are able to do so without falling into delinquency or default, according to the report.

Officials want to create a “smooth transition back into repayment” for borrowers, according to one unnamed official who was quoted in the report, while the administration still considers a more widespread plan to cancel some or all of existing student loan debt.

Miguel Cardona, the Secretary of Education, has said he wants a “ramp up” period for borrowers once the pause is lifted, to ease those borrowers back into the habit of making student loan debt payments. Simply expecting borrowers to resume making payments as if the pause never happened could increase the delinquency and default rates on the loans, which are already high enough. Those concerns are front-and-center, and were shared by Richard Cordray, the Chief Operating Officer of Federal Student Aid, in a speech he gave last month.

“This is a defining moment, and it is important that we get it right,” Cordray said, according to a copy of his remarks. “At a time when so many have been struggling — with their health, their employment, their finances — we cannot burden them with poor execution on the return to repayment.”

One proposal being considered would also make it easier for borrowers to enroll in income-based repayment programs, allowing individuals to self-certify their income over the phone, which could help alleviate the deluge of requests that will likely be made.

The Department is also considering a plan that would “automatically pull more than 7 million borrowers out of default” on their student loans.

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