NYSDFS Sends Letter to DeVos on Ongoing Student Loan Crisis

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 measures to protect student loan borrowers.

On September 30, relief for federal student loan borrowers under the Federal Aid, Relief and Economic Security Act (CARES Act) will end.

“The federal government must act to protect borrowers when 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 is over, millions of student loan borrowers will suddenly see an expense reintroduced into their lives during a time of record unemployment and hardship. It is the responsibility of the US Department of Education that Secretary DeVos do everything in her power to implement the clear and sensible steps set out in the letter from these advocates. States are mobilizing for students, and the federal government must too. “

On October 1, millions of borrowers have to start repaying their loans again. In light of the pandemic and the ongoing economic crisis, including unprecedented unemployment rates, holidays, salary cuts and budget deficits, many student loan borrowers will not be able to pay their monthly payments when they are resumed.

DFS submitted 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 action specific to protect borrowers before the current CARES Act expires. student loan relief date.

The letter urges Secretary DeVos to use her broad power over federal student loans to:

  • Expand the scope of current coverage to include the types of federal student loan borrowers currently excluded;
  • Extend the duration of federal student loan relief until September 30, 2021, in recognition of the long-term effects of the coronavirus and the resulting economic crisis;
  • Ensuring that the US Department of Education’s contracted student loan managers are prepared for millions of accounts to change status simultaneously after September 30; and
  • Streamline access to repayment programs, such as income-based repayment programs, which for many federal student loan borrowers who have lost their jobs or full income might provide low monthly payments or $ 0.

On March 27, Congress passed the CARES Act, an economic stimulus bill that offered various forms of economic assistance. 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 held by the federal government. It did not apply to Federal Family Education Loans Program (FFELP) borrowers whose loans are owned by commercial lenders and all Perkins loan borrowers whose loans are owned by their schools, which represents approximately eight million federal student loan borrowers.

The coalition letter seeks to correct this mistake, especially because borrowers play no role in deciding who owns their loans and should therefore be treated equally.

DFS urges student loan borrowers to visit its website to learn more about steps they can take to prepare for the end of the CARES Act relief: www.dfs.ny.gov/students.

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