Social Security

A new report issued last week provides new evidence that the U.S. Department of Education and its loan servicers may have damaged the credit of thousands of student loan borrowers as it implemented a freeze on federal student loan payments that began last year.

Problems with student loan debt pushed Congress to create a seemingly straightforward law in the 1990s to help borrowers lower default rates by consolidating debt with their spouses. Two decades later, divorced borrowers are struggling with the unforeseen consequences.

But the scope of the economic crisis created by the pandemic, and the fact that borrowers who graduated before 2007, like Heaps, have weathered two massive financial downturns in their professional careers, is bolstering the argument that major fixes are needed. Although student-loan forgiveness did not make it into the American Rescue Plan passed by Congress, the bill does include a provision to make college-loan forgiveness tax-free until Dec. 31, 2025, eliminating an…

While advocacy groups welcomed the Education Department’s decision Tuesday, they continue to urge the Biden administration to help an estimated 5 million other people who are still making payments on their commercial FFEL loans.

The Department’s announcement Tuesday only applies to borrowers with commercially-held FFEL loans who defaulted on their debt. Borrower advocacy groups have been urging the Biden administration to extend the payment pause to all borrowers with commercially-held FFEL loans. They estimate that more than 5 million borrowers have this type of loan and haven’t defaulted, meaning they aren’t eligible for the COVID-19-era relief.

All of the roughly 5 million borrowers holding about $135 billion in debt from privately-held FFELP loans were left out of federal protections amid the coronavirus pandemic.