Statement from Seth Frotman, SBPC Executive Director and Former Top Student Loan Regulator on Emergency Stimulus Proposal
March 18, 2020 | WASHINGTON, DC — Student Borrower Protection Center Executive Director and former CFPB Student Loan Ombudsman Seth Frotman released the following statement on Washington’s plan to send checks directly to American families as part of a $1 trillion stimulus package in response to the coronavirus crisis.
“As policymakers look to send stimulus checks to every American, it is critical that student loan borrowers are not cut out of the deal. The federal government routinely seizes federal benefits owed to student loan borrowers in default—the very borrowers who desperately need cash in a time of crisis. Today, over 9 million student loan borrowers are in default with millions more on their way. Now is not the time to push these borrowers further down the economic ladder. Washington must not allow federal offsets to deny any of these borrowers access to critical dollars.”
In 2008, when Washington last sent checks to American families, the Treasury Department seized those payments to recover debts owed by individual Americans to the Treasury. A 2009 report by GAO describes a spike in government collections driven by the offset of these stimulus payments to recoup delinquent tax debts.
Today, more than nine million borrowers are currently sitting in default. Among them, we find people from every walk of life, including servicemembers, senior citizens, and veterans. Another three million borrowers are approaching default, and are at least two payments behind. Last year, defaults spiked with more than 1.2 million borrowers defaulted on a student loan – that is one default every 26 seconds.
Student loan defaults disproportionately affect people of color, low-income students, those with debt but no degree, and people who attend predatory, for-profit schools, and millions of others who have fallen through the cracks in our broken student loan system.