There a few unanswered questions regarding the roll out of federal student loan borrower protections provided by the CARES Act.
The Student Borrower Protection Center and the National Consumer Law Center have combined forces and raised certain concerns to Secretary DeVos in a letter today that can be found here.
Clarifications are being made to the Paycheck Protection Program which have encouraged, in particular large cap, public companies, with access to other funds, to return funds that were meant for small business. Perhaps the attached recommended consumer guidance will encourage the Department of Education to clarify and extend borrower protections where necessary as well.
One of the biggest challenges is to prohibit student loan servicers from capitalizing previously accrued interest following the suspension of payments. There is approximately $83 billion in accrued interest outstanding as of the end of 2019.
These two consumer protection agencies also call to reduce the paperwork burden and allow those in Income Driven Plans to certify their income verbally. While I understand that long term, this may cause overreaching fraud: short term, it would help ease the burden faced by consumers now who can’t get their servicer on the phone to renew their IDR plans.
We are seeing significant issues when we try to enroll our clients into rehabilitation plans — that is causing them to waste this opportunity to rehab their federal student loans to avoid garnishment. Hopefully, this problem will be addressed shortly. Stay tuned.
If anyone is in default on federal student loans, now is an excellent opportunity to cure that default with “credit toward time served” as I like to say. This means no concurrent rehab payment and garnishment while the default is being cured until September 30. That is substantial savings of both time and money!! Reach out to us if you need help doing this.