You may be required to immediately repay the entire unpaid amount of your loan. You will not be eligible for additional federal student aid. You will lose eligibility for loan deferment, forbearance, and repayment plans. What are the consequences of default?īeing delinquent or defaulting on a loan may affect many areas of your life: You may experience serious legal consequences if you default. For most federal student loans, you will default if you have not made a payment in more than 270 days. Default is failure to repay a loan according to the terms agreed to in the promissory note. You can read a summary of the SIMPLE Act here, and the full text of the bill here. In addition to NASFAA and TICAS, the SIMPLE Act is endorsed by Third Way and New America. Fitzpatrick for leading the bipartisan SIMPLE Act, which makes common-sense improvements to help student loan borrowers access more affordable repayment options and avoid the devastating consequences of loan default," said Michele Streeter, Senior Director of College Affordability, The Institute for College Access & Success (TICAS). The financial aid community stands in support of this bill," said Justin Draeger, President & CEO, National Association of Student Financial Aid Administrators (NASFAA) The bill also eliminates burdensome annual paperwork requirements, making it easier for borrowers to remain enrolled in IDR. The SIMPLE Act would expand access to affordable income-driven repayment options by automatically enrolling struggling borrowers in IDR plans before they experience the punitive consequences of default. Unfortunately, the complexities of enrolling and remaining in IDR keep many vulnerable borrowers from accessing this important safety net. "Income-driven repayment (IDR) plans offer a lifeline for millions of student loan borrowers, making repayment more affordable and helping struggling borrowers avoid default. The SIMPLE Act prioritizes and protects vulnerable student loan borrowers-those who are in immediate danger of default, and those who are totally and permanently disabled-from these severe consequences. I am proud to support the SIMPLE Act, which will provide our students and borrowers what they deserve: more efficient access to the repayment resources already at their disposal."ĭefaulting on student loans can cause long-term financial damage, disproportionately affecting low-income borrowers and borrowers who have up to $10,000 in debt with no degree. "Student loan defaults have damaging consequences for borrowers that can last for significant periods of time, an issue only worsened in the midst of the COVID-19 pandemic. Investing in one's own future through higher education should not lead to long-term financial distress," said Congressman Brian Fitzpatrick. "For too many, student loan debt is a crippling burden that impacts borrowers' involvement in our economy and achieving personal goals like owning a home, starting a family, and supporting the community. The decision to go to college shouldn't lead to financial ruin, and I'm glad to work across the aisle to find an urgent, common-sense solution to the convergent crises of growing student debt and diminishing college affordability." It is unacceptable that people who invested time and resources in their education have to navigate a needlessly complicated student repayment system. "The bipartisan SIMPLE Act will streamline the enrollment process for income-driven repayment plans, making it easier for borrowers to access affordable payments and avoid catastrophic defaults. "Although the Biden-Harris administration has taken encouraging steps to improve student loan forgiveness and income-driven repayment plans, there is more we can do to help borrowers," said Congresswoman Suzanne Bonamici, Chair of the Education & Labor Subcommittee on Civil Rights and Human Services. The bill also removes the redundant annual paperwork for updating income information while enrolled in these plans, further lowering risk of default. Treasury to connect borrowers automatically with existing repayment plans. The legislation uses information already on file at the Department of Education and U.S. The bipartisan Streamlining Income-driven, Manageable Payments on Loans for Education (SIMPLE) Act will help prevent student loan defaults by automatically enrolling struggling borrowers in income-driven repayment plans so they can repay based on financial ability. WASHINGTON, DC – Congresswoman Suzanne Bonamici (D-OR) and Congressman Brian Fitzpatrick (R-PA) introduced updated legislation to help student loan borrowers avoid default.
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