The Biden administration is suspending collections on defaulted student loans held by more than one million borrowers, the latest in a flurry of moves to offer relief to adults struggling to make ends meet during the pandemic.
The move extends relief to 1.14 million students who borrowed under an older loan program known as the Federal Family Education Loan Program, and then defaulted on those loans. This group hadn’t been covered by prior coronavirus-related adjustments to collections and payment requirements.
FFEL loans are guaranteed by the federal government but held by private lenders. Some defaulted loans were purchased by the Education Department during the financial crisis more than a decade ago, but others are still held by private entities.
FFEL borrowers whose loans are owned by private lenders and who are not in default aren’t affected by Tuesday’s announcement. A senior agency official said there are a couple million borrowers in that category, and the Education Department is “still looking at what our options are there” for extending debt relief to them.
The Education Department on Tuesday also set interest rates on privately held defaulted FFEL loans at 0%, effectively suspending interest payments. The collections pause and adjusted interest rate are both retroactive to March 13, 2020, when the nation first declared a national emergency for the Covid-19 pandemic. Any loans that went into default since that time will also be restored to good standing, which could help repair borrowers’ credit scores.