— Finance

Democrats sound alarm on student loan collections as payment restart looms

Several prominent Democratic lawmakers are asking the Education Department (ED) about student debt collection practices in the face of a potential wave of student loan defaults when the pandemic payment pause expires, Yahoo Finance has learned, “With student loan and interest payments scheduled to resume on October 1, 2021, and a wave of loan delinquencies and defaults

WASHINGTON, DC - FEBRUARY 4: (L-R) Rep. Ayanna Pressley (D-MA) speaks as Sen. Elizabeth Warren (D-MA) looks on during a press conference about student debt outside the U.S. Capitol on February 4, 2021 in Washington, DC. The group of Democrats re-introduced their resolution calling on President Joe Biden to take executive action to cancel up to $50,000 in debt for federal student loan borrowers. (Photo by Drew Angerer/Getty Images)

likely to follow, we are concerned about the Department resuming these payment collections and are seeking information about how ED plans to avoid long-term financial harm to borrowers,” Sen. Elizabeth Warren (D-MA), Sen. Cory Booker (D-NJ), and Rep. Ayanna Pressley (D-MA) wrote in a letter sent to Secretary of Education Miguel Cardona on Wednesday morning, which was obtained by Yahoo Finance.

ED did not immediately respond to a request for comment.

Even before the pandemic, the letter stressed, “collections on defaulted student loans were catastrophic for borrowers in default, who saw their wages, tax refunds, and even Social Security checks confiscated, in addition to being forced to pay exorbitant fees.”<img alt=” WASHINGTON, DC – FEBRUARY 4: (L-R) Rep. Ayanna Pressley (D-MA) speaks as Sen. Elizabeth Warren (D-MA) looks on during a press conference about student debt outside the U.S. Capitol on February 4, 2021, in Washington, DC.

According to a recent report from Politico, the letter comes as some ED officials urge the White House to extend the payment pause into 2022. Warren and U.S. Senator Ed Markey (D-MA) wrote to the White House directly on July 13 to “urge you to extend the current pause on payments and interest until at least March 31, 2022.”

Federal actions amid the pandemic will lead to roughly $100 billion in total student loan forgiveness between March 2020 and September 2021, according to Education Department (ED) data and analysis from experts, providing a financial lifeline to roughly 45 million student loan borrowers.

According to the New York Fed, student loan balances increased by $29 billion to $1.58 trillion in the first quarter of 2021. At the same time, only 6.2% of student loans were in serious delinquency or default in the first quarter of 2021 due to the payment pause and debt collection moratorium.

Molly Aronson

Molly Aronson is a 26-year-old government politician who enjoys bowling, running and jigsaw puzzles. She is creative and exciting, but can also be very greedy and a bit greedy.She is an australian Christian who defines herself as straight. She has a post-graduate degree in philosophy, politics and economics. She is allergic to grasshoppers.

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