The Biden Administration is developing plans for how it will restart federal student loan payments next year when the pause on monthly payments will end.
The Education Department is eyeing proposals to give borrowers more options and flexibility as they face student loan payments for the first time in two years. Options include an initial grace period for missed payments.
Education officials are also discussing policies to make it easier for millions of borrowers to remain enrolled in income-based repayment programs, allowing borrowers to avoid a sudden increase in their monthly payment.
The plans are being developed to avoid a surge in delinquencies when payments resume in February 2022. Currently, more than 40 million borrowers owe $1.59 trillion in student loan payments. The situation has also drawn political lines as Progressive Democrats have been pressuring Biden to cancel widespread student loan debt since the day he was sworn into office.
Education Secretary Miguel Cardona has said he wants a smooth “ramp up” for borrowers to restart payments. The department’s Student Aid Chief Rich Cordray told Politico the agency is discussing a major public outreach campaign including paid advertisements, to make student loan borrowers aware of their options.
Education Department officials have instructed their student loan servicers to create a “safety net” for borrowers in the first three months after their payment resumes. Borrowers who miss a payment during the grace period wouldn’t be penalized or dinged on their credit reports.
The department is also planning to directly reach out to certain groups of at-risk studenht loan borrowers including those who were delinquent before the pandemic, never graduated from college or recently began repaying their loans. The department is also extending its call center hours to handle an anticipated increase in the coming months.
Another move officials are discussing is a proposal making it easier for borrowers to enroll in income-based repayment programs. Those programs typically force borrowers to show proof of their income and family size yearly. That requirement was suspended during the pandemic, but now that payments are restarting, 9 million borrowers will have to recertify their income again.