The New York State Department of Financial Services sent a letter to U.S. Department of Education Secretary Betsy DeVos on behalf of a multi-state coalition of student loan advocates urging the Secretary to take proactive steps to protect student loan borrowers.
On September 30th relief for federal student loan borrowers under the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act), will end.
“The federal government must act to protect borrowers as the CARES Act student loan relief ends,” said Superintendent of Financial Services Linda A. Lacewell. “Households in New York, and across the country, are already struggling to make ends meet during this crisis. Once the CARES Act payment suspension ends, millions of student loan borrowers will suddenly have an expense reintroduced into their lives during a time of record unemployment and hardship. It is incumbent to the U.S. Department of Education’s purpose that Secretary DeVos do everything within her broad authority to implement the clear and common-sense steps laid out in these advocates’ letter. The states are stepping up for students, and the federal government must too.”
On October 1st millions of borrowers must begin repaying their loans again. In light of the ongoing pandemic and economic crisis, including unprecedented unemployment rates, furloughs, wage cuts and budget shortfalls, many student loan borrowers will be unable to afford their monthly payments when they resume.
DFS submitted a letter on behalf of student loan advocates from state agencies in Illinois, Washington, Nevada, Virginia, Maine, Colorado, and the District of Columbia calling on Secretary DeVos to take specific action to protect borrowers in advance to the CARES Act’s current sunset date for student loan relief.
The letter urges Secretary DeVos to use her broad authority over federal student loans to:
- Expand the scope of the current coverage to include types of federal student loan borrowers currently excluded;
- Extend the duration of relief for federal student loans to September 30, 2021, in recognition of the long-term effects of the coronavirus and resulting economic crisis;
- Ensure the U.S. Department of Education’s contracted student loan servicers are prepared for millions of accounts to change status simultaneously after September 30; and
- Streamline access to repayment programs, such as income-driven repayment programs, that for many federal student loan borrowers who have lost their job or full income could provide low or $0 monthly payments.
On March 27th Congress passed the CARES Act, an economic stimulus bill that provided a variety of forms of economic relief. The relief for federal student loans included six months of automatic payment suspensions and interest rates reduced to zero percent. However the CARES Act only applied to federal student loans owned by the federal government. It did not apply to Federal Family Education Loan Program (FFELP) borrowers whose loans are owned by commercial lenders and all Perkins Loan borrowers whose loans are owned by their schools, representing approximately eight million federal student loan borrowers.
The coalition’s letter seeks to correct this error, particularly because borrowers play no role in deciding who owns their loans, and so should receive equal treatment.
DFS urges student loan borrowers to visit its website to learn about steps they can take to prepare for the end of the CARES Act relief: www.dfs.ny.gov/students.