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An expansion of the federal moratorium on student loan payments will now offer relief to upwards of one million additional borrowers who defaulted on loans provided by private lenders, the U.S. Department of Education announced on Tuesday.
The action, which takes effect as President Joe Biden's administration works to alleviate economic burdens during the coronavirus pandemic, suspends interest and collections on student loans through the Federal Family Education Loan (FFEL) Program. Loans provided through the FFEL program were initially funded by private entities and insured by guaranty agencies, then reinsured by the federal government. After the program ended in 2010, the Education Department became the only source able to lend federally-subsidized student loans.
"At a time when many student loan borrowers have faced economic uncertainty, we're ensuring that relief already provided to borrowers of loans held by the Department is available to more borrowers who need the same help so they can focus on meeting their basic needs," said U.S. Secretary of Education Miguel Cardona in a statement on Tuesday. "Our goal is to enable these borrowers who are struggling in default to get the same protections previously made available to tens of millions of other borrowers to help weather the uncertainty of the pandemic."
For additional reporting from the Associated Press, see below:
The action is meant to bring relief to the hardest-hit borrowers in a program that allowed private lenders to provide student loans that were backed by the federal government.
Biden announced in January that federal student loan payments would remain suspended and interest rates would be set at 0% through at least Sept. 30, extending an action from the administration of former President Donald Trump. But it applied only to those with debt held directly by the federal government, leaving out millions with private student loans.
Cardona on Monday extended the payment pause and 0 percent interest rate to 1.1 million borrowers who had defaulted on privately held loans. It includes more than 800,000 who were at risk of having their tax refunds seized to repay a defaulted loan.
"Our goal is to enable these borrowers who are struggling in default to get the same protections previously made available to tens of millions of other borrowers to help weather the uncertainty of the pandemic," Cardona said in a statement.
The Education Department said it's working to return tax refunds or wages that were seized over the last year to cover the defaulted loans. Borrowers can also request refunds for any voluntary payments they made during the past year. Any loans that went into default since March 13, 2020, will be returned to good standing.
