On May 1, the federal government is supposed to resume collections — for the first time in more than two years — from 43 million borrowers on $1.6 trillion in federal student loan debt. Virtually no one involved in the collection process thinks that will happen, but no extension of the pause has been announced, the New York Times reported. The Education Department, the primary lender for Americans who borrow for college, outsources the work of collecting payments to six outside vendors. Last month, it told those loan servicers to hold off on notifying borrowers that their payments would soon be due. The servicers took that as a sign that the payment pause — which began in March 2020 as a pandemic relief measure, and has now stretched across two presidential administrations — would once again be extended. But with just weeks to go, they’re still waiting for guidance from the government on whether they should start billing borrowers again. Two officials at different loan servicers said that their businesses had staffed up to be ready for the May 1 restart. The executives, who spoke on the condition of anonymity to avoid alienating government officials, said they were frustrated by the lack of clear instructions. Neither the White House nor the Education Department answered questions about whether the May 1 restart date would be pushed back. In separate statements, both said the Education Department would continue communicating with borrowers and servicers, including about “the type and cadence of servicer outreach to borrowers.” Read more.
In related news, as prominent Democrats call on the president to extend the payment pause and cancel student loan debt, a group of lawmakers sent a separate request to two agencies for an update on how the federal government is working to make debt relief more accessible for bankrupt student debtors, YahooFinance.com reported. Unlike other forms of debt, federal student loans are not easily erased when a debtor undergoes bankruptcy proceedings. Debtors need to prove that they would suffer from "undue hardship" due to the loans, a standard that's been very difficult to meet. A letter sent on Thursday from Senate Majority Whip Dick Durbin (D-Ill.), chair of the Senate Judiciary Committee, Senate Majority Leader Chuck Schumer (D-N.Y.), and Sen. Patty Murray (D-Wash.) to Education Secretary Miguel Cardona and Attorney General Merrick Garland argued that the situation is made more difficult by how the government contests these debtors in court. "The federal government’s aggressive litigation challenges against students who pursue undue hardship claims further exacerbates this situation," the letter stated. Read more.
