March, 2020
Washington – There is much confusion in the student-loan community about what action the federal government should take to help borrowers affected by the coronavirus pandemic.
The president announced as part of his coronavirus emergency declaration that interest on federal student-loans will be not be charged for six months. But the Department of Education has apparently interpreted this to mean that a borrower's final bill, possibly years in the future, will be reduced accordingly. That is not helpful now.
Suggestion: convert loan payment forbearances to deferments for six months by recognizing the national coronavirus emergency as deferment-eligible. Forbearances accrue interest, deferments on subsidized loans do not.
Such action would also target the relief more toward those who need it than those who don't.
Some have questioned the legality of giving relief at all. Clearly, the secretary of education has the power under 20 USC 1082. The secretary can compromise loans as necessary for the good of the program and the good of the country. The secretary can issue emergency rules under the Administrative Procedures Act in the public interest, including public safety.
The secretary could also stop collections of defaulted loans temporarily. There is a case for this beyond the coronavirus emergency, because some collections have been taking place illegally on loans that were already cancelled.
States are not without their own police powers in these matters, with responsibility to protect the health, safety, and welfare of their residents. Governors and state attorney generals, acting under their consumer protection authorities, could suspend garnishments and other draconian collections temporarily. As the recent decision in Nelson v. Great Lakes indicates, states are not preempted by the federal Higher Education Act from acting on student-loans.
This is not to say more doesn't need to be done, perhaps along the lines of the previous post, only that there needs to be more clarity and action on what has already been announced.
