Student Aid Group Releases Ideas for Loan Reforms

While many wait to see what President Biden will do about forgiving student debts, the National Association of Student Financial Aid Administrators today released a report on other ideas that it thinks are necessary.

“As the president and Congress debate and consider widespread debt forgiveness, we call attention to the noticeable absence and urgently needed policy reforms that will prevent borrowers from being in this same exact position in the future,” said NASFAA president and CEO Justin Draeger.

The ideas include:

• Simplifying and making student loans more affordable by eliminating origination fees, lowering student loan interest rates and consolidating existing repayment plans into three easy-to-understand plans.
• Eliminating negative amortization, which creates “a pernicious cycle where too many borrowers end up with larger loan balances years after they’ve entered repayment.”
• Reforming the Public Service Loan Forgiveness program to allow for rolling, ongoing forgiveness and ensuring borrowers benefit from current flexibilities that waive bureaucratic program restrictions that may have prevented some borrowers from qualifying for forgiveness.
• Rehabilitating all borrowers who are currently in default with a one-time reset, and developing safety nets for borrowers going forward that allows them to quickly rehabilitate their defaulted student loans at reduced cost and penalty.
• Moving forward, automatically enrolling delinquent borrowers in income-driven repayment before they enter default, whenever possible.