The question is, what happens next?
“Moving tens of millions of borrowers from one status to another is incredibly taxing on a system that is already broken in a lot of ways, and this fresh start program adds another piece of complexity to that puzzle,” said Sarah Sattelmeyer, project director for education, opportunity, and mobility in the Higher Education Initiative at New America, a think tank. “To be clear, this is a very positive piece of complexity. This is a really important step forward. But it matters to get it right.”
For months, advocates like Sattelmeyer have called on ED to make such a move, citing how the punitive default system can shove people in poverty into deeper distress. Borrowers in default can have their wages garnished, tax refunds seized, and, for older people, money taken out of their Social Security checks while struggling to survive. Many also have families.
“That’s all social safety net money that is supposed to lift people up who are in poverty,” said Abby Shafroth, staff attorney at the National Consumer Law Center, a nonprofit that specializes in consumer issues on behalf of low-income people. “If this fresh start action hadn’t been announced, then it meant that roughly eight million borrowers with loans in default who had been protected from that collection system would once again be thrown into that system—and once again faced with these measures that push them further into poverty.”
Experts point out that the default rate is particularly high for students who drop out of a for-profit college. These borrowers are also disproportionately Black and Pell Grant-eligible, hailing from low-income households.
But as Sattelmeyer noted, if this fresh start is not done right, borrowers once in default could end up falling back into default.
