As Key Student Loan Relief Programs End or Are Mired In Turmoil, Advocates Urge Biden Administration To Act

Advocates for student loan borrowers are ramping up a pressure campaign to convince the Biden administration to extend student loan relief as millions of borrowers face increasing turmoil. 

An unfortunate confluence of events is causing unprecedented chaos in the federal student loan system, and the consequences of these issues may just be coming into focus. 

SAVE plan borrowers forced into forbearance

At least eight million borrowers enrolled in the Saving on a Valuable Education (SAVE) plan have now been forced into a forbearance after the 8th Circuit Court of Appeals issued a nationwide injunction blocking the program while litigation continues. 

No payments are due during the forbearance, and no interest will accrue on balances — but the time won’t count toward student loan forgiveness under income-driven repayment (IDR) or Public Service Loan Forgiveness (PSLF). 

The injunction has also forced the Education Department to temporarily take down the online IDR application and pause IDR processing to update its internal systems, causing impacts well beyond SAVE plan borrowers. This “temporary” action has now been ongoing for nearly six weeks, with no word on when processing will resume. 

Two key programs ending in September

Meanwhile, two key Biden administration programs are winding down at the end of September. 

• The “on-ramp” initiative has protected borrowers who miss payments on their student loans since the COVID-19 forbearance ended last fall, shielding them from the worst consequences of delinquency such as late fees, negative credit reporting and default.
• Fresh Start, another temporary program, has protected defaulted borrowers from collections activity and provided a new pathway to get their student loans back into good standing. 

Both programs expire at the end of September, so starting in October, borrowers who miss student loan payments will experience severe consequences. Those who remain in default will soon face draconian collections efforts that could include administrative wage garnishment, seizure of federal tax refunds (including the Earned Income Tax Credit), the offset of Social Security benefits and even litigation. 

Taken together, the chaos borrowers are experiencing in the student loan system as these relief measures wind down could spell disaster for millions. 

Coalition calls for extension of relief programs

Last week, a coalition of more than 110 organizations, including labor unions, student loan borrower advocacy groups and civil rights organizations, sent a letter to Education Secretary Miguel Cardona, urging the Biden administration to take immediate steps to minimize harm to borrowers.

Groups urge Biden administration to extend on-ramp and fresh start for student loan borrowers

For 12 months, the “on-ramp” initiative has protected borrowers who missed payments on their student loans. The on-ramp initiative is a temporary program the Biden administration implemented at the end of the COVID-19 forbearance to ease the transition back to normal repayment. 

During the on-ramp, borrowers who miss payments:

• Would have the missed month retroactively placed into forbearance.
• Should not have incurred late fees.
• Should not have been reported delinquent to national credit bureaus. 
• Would not have gone into default due.

Meanwhile, during the same period, the Fresh Start program has protected defaulted borrowers from the most draconian features of the federal student loan debt collection system while providing them with a pathway to restoring their loans to good standing and accessing programs like IDR and PSLF.

But with the Fresh Start and on-ramp programs coming to an end on September 30, the coalition of advocacy groups is warning that the resumption of normal repayment and the end of these protections could not be coming at a worse time.

“Borrowers are now desperately trying to understand how to manage their student loan debt with limited options for making affordable monthly payments or progressing toward promised forgiveness via Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) loan forgiveness,” wrote the group.

“We urge the Department to extend these two pivotal programs,” says the letter. “The on-ramp protection period must continue to hold student loan borrowers harmless for missed payments during this tumultuous time and the Fresh Start program should continue to be available to defaulted borrowers who have not yet enrolled in it. No borrower should be forced into delinquency, default, or collections while they are unable to access the full suite of affordable repayment options they are entitled to under the law.”

Coalition argues SAVE plan forbearance should count toward student loan forgiveness

The coalition is also urging the Education Department to change its position and allow the SAVE plan forbearance, which millions of borrowers were forced into, to count toward student loan forgiveness under IDR and PSLF.

“Due to the federal court injunction preventing the Department from implementing parts of the SAVE Plan and other IDR plans, the suspension of online applications for all other IDR plan options, and the processing backlog of paper applications, millions of borrowers are essentially stuck in forbearance for the foreseeable future through no fault of their own,” says the letter. “These borrowers should not be further harmed by having their progress toward IDR or PSLF forgiveness stalled indefinitely.”

Limited options for borrowers stuck in forbearance

Currently, borrowers who have been forced into the SAVE plan forbearance have limited options:

• They can apply to switch to the Income-Based Repayment (IBR) plan. But with IDR processing suspended and the department anticipating lengthy delays once processing resumes, it may be months before borrowers can effectively change plans. IBR also is more expensive than SAVE and does not have the same features and benefits, such as a generous interest subsidy.
• PSLF borrowers can try to utilize the new PSLF Buyback program to get loan forgiveness credit during the SAVE plan forbearance. But this new and largely untested program has significant restrictions that may prevent many borrowers from getting immediate relief. 
• PSLF borrowers could also switch to the 10-year Standard plan. While it qualifies for PSLF, payments may be prohibitively expensive for many, and others may not even be able to access that plan if they have consolidated their loans.

Related: How to Successfully Change Your Student Loan Repayment Plan

Other groups call for broad pause on student loan payments

Other student loan borrower advocacy groups are calling on the Biden administration to resume a systemwide pause on student loan payments and interest, akin to the COVID-era forbearance, given the widespread turmoil. 

“The Biden administration resumed student debt payments because they said borrowers would simultaneously get financial relief,” said Braxton Brewington, spokesperson for the Debt Collective, a debtor’s union advocating for student loan borrowers, in a statement this week. 

“That broad scale relief never came. And now, just a month before a critical election, costly payments are knocking on the door of families who are barely getting by. There is every reason to issue a pause on student loans and extend the critical protections debtors have had for the past year.”

Challenges to a system-wide pause

While a pause on student loan payments might help borrowers, it faces legal challenges. Enacting a systemwide pause may be difficult for the Biden administration and would likely face its own legal challenges. While the HEROES Act allows the Education Department to waive payment obligations in response to a national emergency, Congress passed legislation officially ending the COVID-era emergency and codifying the resumption of student loan payments last year. 

So far, the Biden administration has given no indication that it intends to pause student loan payments or extend the benefits of the on-ramp or Fresh Start beyond their September 30 expiration.