The Department of Education Is Putting Student Loans Back on Track

The Department of Education announced yesterday a multi-pronged plan to restart collections on defaulted loans and begin an outreach campaign to federal student loan borrowers that they need to once again begin paying back their loans.  

Loan payments were paused at the beginning of the pandemic and both the Trump and Biden administrations extended that pause at a combined cost to the federal government of roughly $200 billion. The Biden administration further delayed repayment with a hold-harmless “on-ramp” for non-payment and by letting collections contracts for defaulted loans lapse, and also attempted – often unsuccessfully – to cancel a substantial amount of debt outright.

The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget: 

The Committee for a Responsible Federal Budget supports the Department of Education’s efforts to collect on defaulted loans and let borrowers know that it really is time to start repaying again. While a short repayment pause was justifiable early in the pandemic, that was five years ago – and it makes no sense today.  

Student loan borrowers have been made far too many false promises, and have served far too long as political pawns in a confusing and legally questionable policy back and forth. It’s time for the federal government to be honest with these borrowers, and to get its $1.6 trillion of loan holdings under control.

Less than half of borrowers are currently paying back their student debt, with most of the rest in default, delinquency, or administrative forbearance. That’s not a sustainable way to run a loan program.

Ultimately, we’ll need a legislative solution to fix our loan programs and improve the cost and quality of higher education. We also need a well-resourced servicing and collection apparatus. Meanwhile, the Administration is taking the right approach by beginning to restart repayments in earnest and conducting a creative and aggressive outreach strategy to make sure borrowers understand their obligations.

After years of false promises, we’re glad to see the government finally leveling with borrowers. It’s an important step in the right direction. 

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For more information, please contact Matt Klucher, Assistant Director of Media Relations, at klucher@crfb.org.