A top official at the US Department of Education has warned that there could be a massive increase in student loan defaults if debt forgiveness is blocked.
Undersecretary James Kvaal said in a new court filing that the Department anticipates there “could be a historically large increase in the amount of federal student loan delinquency and defaults due to the COVID-19 pandemic” unless they are “allowed to provide debt relief.”
This comes as the DoE requests a stay on order temporarily blocking the Biden administration’s controversial but popular debt relief program.
The borrowers most at risk of defaulting are those for whom the debt forgiveness would have erased all of their loan balance. This is around 18 million people.
Kvaal said, “These student loan borrowers had the reasonable expectation and belief that they would not have to make additional payments on their federal student loans. This belief may stop them from making payments even if the Department is prevented from effectuating debt relief.”
The filing adds, “Unless the Department is allowed to provide one-time student loan debt relief, we expect this group of borrowers to have higher loan default rates due to the ongoing confusion about what they owe.”