Student-loan payments are about to restart and 'exacerbate financial distress' for millions of borrowers, Elizabeth Warren says. Here are 6 steps she wants Biden to take to soften the blow.

• Sen. Elizabeth Warren wants Biden to consider actions to help student-loan borrowers who miss payments.
• Payments are scheduled to resume in October after the Supreme Court struck down broad relief.

Student-loan payments are resuming in just a few months, and Massachusetts Sen. Elizabeth Warren wants President Joe Biden to do everything he can to ensure the transition is as harmless as possible.

When Biden signed the bill to raise the debt-ceiling bill into law in June, he also codified the end of the student-loan payment pause — meaning the education secretary can no longer extend the pause in connection with COVID-19. It now also means that millions of student-loan borrowers are resuming payments in October without a reduction to their balances because the Supreme Court struck down Biden's plan to cancel up to $20,000 in student debt on June 30.

While the Education Department has announced a series of measures to ease the transition back into repayment — including a 12-month "on-ramp" period starting in October, to ensure borrowers who miss payments are not reported to credit agencies — Warren wants the administration to consider additional safeguards following the resumption.

"I am concerned that the end of the federal payment pause year risks exposing borrowers who struggle to make their payments to wage garnishments, tax refund offsets, and other forms of collections which can exacerbate financial distress – particularly if, as the Department has projected, delinquencies and defaults spike in the absence of additional loan relief," Warren wrote in a letter to Education Secretary Miguel Cardona on Monday, exclusively viewed by Insider.

"These concerns are heightened by the disappointing decision of the Supreme Court, which substituted politics for the rule of law and denied President Biden's initial plan to provide up to $20,000 in student debt cancellation for working Americans," she said.

To build on the department's actions to help borrowers "avoid the harshest consequences of missed, partial, or late payments," Warren is asking the department to consider taking the following steps:

1. Create a policy to eliminate student debt when borrowers are in long-term default
2. Create a policy to eliminate student debt when the department does not have updated contact information for borrowers
3. Stop requiring a borrower repay the full amount of debt when they enter default
4. "Exhaust all other options," including determining if a borrower is eligible for relief, before sending their debt to collections
5. Allow borrowers who are approved for income-driven repayment plans while in default to be automatically pulled out of default
6. Strengthen contract terms with debt collectors to prevent predatory practices

As Warren wrote in her letter, when a borrower enters default, the Education Department requires them to repay their full outstanding student-loan balance — including principal, interest, and fees.

"Requiring borrowers to repay the full amount of debt upon default, rather than the past-due balance on an IDR plan, significantly increases both the total repayment amount and the time required to settle the debt," Warren wrote.

To help those in default, the department has already announced a "Fresh Start" program that will restore 7.5 million borrowers behind on payments to good standing once payments resume. The benefits of the plan will last one year following the resumption, and during that time borrowers will have to make payment arrangements with their student-loan company to benefit.

Still, as Warren wrote, borrowers might still "fall through the cracks" once payments resume — and wants Biden to reform the process for defaulted borrowers.

In the meantime, the department on Tuesday is holding its first public hearing on its new route for broad student-debt relief using the Higher Education Act of 1965. The law requires the administration to go through a negotiated rulemaking process. And while White House officials have said could take months, Miguel Cardona has expressed confidence in the new route.

"I want to reassure you — the Biden-Harris team is not done fighting for student loan borrowers or for working families," Cardona recently wrote on Twitter. "Our fight is not over."