DEPARTMENT OF THE TREASURY

BUREAU OF THE FISCAL SERVICE

WASHINGTON, DC 20227

February 28, 2021

Phil Rosenfelt

Acting Secretary

U.S. Department of Education 

400 Maryland Avenue, SW

Washington, D.C. 20202

Dear Acting Secretary Rosenfelt: 

Thank you for your letter dated February 27, 2021 concerning persons who owe a delinquent Federal 

student loan and seek to participate in the Paycheck Protection Program (PPP), which is administered 

by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic 

Security Act (Pub. L. 116–136) and the Economic Aid to Hard-Hit Small Businesses, Nonprofits and 

Venues Act (Pub. L. 116-260). 

Under 31 U.S.C. § 3720B and Treasury’s implementing regulations at 31 CFR § 285.13, a person

owing a delinquent Federal nontax debt generally may not obtain Federal financial assistance. The 

Secretary of the Treasury may exempt certain classes of debts from affecting a debtor’s eligibility for 

Federal financial assistance if the Secretary determines it is in the best interests of the Federal 

Government. See 31 U.S.C. § 3720B(a); 31 CFR § 285.13(f)(3). Such an exemption does not change 

the eligibility requirements that agencies set under their own statutes and regulations. This authority to 

grant an exemption has been delegated to the Fiscal Service Commissioner. 

You requested that I exempt delinquent Federal student loans from the bar imposed by 31 U.S.C. 

§ 3720B and 31 CFR § 285.13 with respect to the PPP. The exemption request pertains to Federal 

student loans in delinquent status that have arisen from programs under Parts B, D, and E of the Higher 

Education Act of 1965, as amended, as well as other programs now administered by the Department of 

Education. These programs include the William D. Ford Federal Direct Loan program, the Federal 

Family Education Loan program, the Federal Perkins Loan program, the Health Education Assistance 

Loan program, and the Teacher Education Assistance for College and Higher Education Grant program. 

The request pertains to Federal student loans owed directly to the Department of Education as well as 

Federal student loans held by institutions of higher education or those guaranteed or insured by the 

Department of Education and which are held by private lenders or guaranty agencies. 

I hereby grant your request. This exemption from the bar imposed by 31 U.S.C. § 3720B will apply 

only to Federal financial assistance in the form of PPP loans and will cover delinquent Federal student 

loans owed by current or previous PPP borrowers as well as new PPP applicants. SBA retains the 

authority, however, to set additional and more stringent eligibility criteria in the PPP regulations. See 

31 CFR § 285.13(b)(3) and (c)(2).

As further detailed in your letter, this exemption will remove a barrier for delinquent Federal student 

loan borrowers to help them access economic assistance from the PPP and may promote repayment of 

these borrowers’ Federal student loans. Because SBA is required to forgive PPP loans for qualified 

borrowers, the exemption should pose little risk of financial loss to the Federal Government. Further, 
 

Page 2

SBA supports the exemption and plans to revise the eligibility criteria in the PPP regulations to remove 

a similar barrier affecting borrowers with Federal student loans in delinquent status. Taken together, 

these factors support my decision that the exemption is in the Federal Government’s interest. 

Please contact Michelle Cordeiro, Senior Attorney, at (202) 874-6680 with any questions.

Sincerely,

Matthew J. Miller

Acting Commissioner 

cc: Timothy Gribben 

 Acting Fiscal Assistant Secretary

U.S. Department of the Treasury

Tami Perriello

Acting Administrator

Small Business Administration.
UNITED STATES DEPARTMENT OF EDUCATION

OFFICE OF THE SECRETARY

February 27, 2021

Mr. Matthew Miller

Acting Commissioner for the Bureau of the Fiscal Service

U.S. Department of the Treasury

401 14th St SW, Room 545

Washington, DC 20227

Dear Acting Commissioner Miller:

I am writing to request and recommend an exemption to allow small business owners who are 

currently delinquent on a Federal student loan, including sole proprietors, independent 

contractors, and self-employed individuals, to obtain loans through the Paycheck Protection 

Program (PPP). The Small Business Administration (SBA) has reviewed and supports this 

request.

The Debt Collection Improvement Act (DCIA) bars persons who are delinquent on Federal 

nontax debts from obtaining Federal financial assistance in the form of certain loans or loan 

insurance guarantees.1 The Department of the Treasury has issued regulations at 31 CFR § 

285.13 to implement this bar. Under these regulations, the head of a creditor agency may request 

that Treasury exempt any class of debts from affecting a debtor’s eligibility for Federal financial 

assistance if an exemption is in the best interests of the Federal government.

2

In accordance with 31 C.F.R. § 285.13(f)(2), I am providing the following information in support 

of this request for an exemption:

1. The nature of the program under which the delinquencies have arisen.

The delinquencies referenced above have arisen under loans from programs under Parts B, D, 

and E of the Higher Education Act of 1965, as amended, as well as other programs now 

administered by the Department. These programs include the William D. Ford Federal Direct 

Loan (Direct Loan) program, the Federal Family Education Loan (FFEL) program, the 

Federal Perkins Loan program, the Health Education Assistance Loan (HEAL) program, and 

the Teacher Education Assistance for College and Higher Education (TEACH) Grant 

program, if those TEACH Grants have converted into loans. These delinquencies include 

loans owed directly to the Department of Education, as well as Federal student loans held by 

institutions of higher education, or those guaranteed or insured by the Department of 

Education and which are held by private lenders or guaranty agencies.

1 See 31 U.S.C. § 3270B. SBA regulations for the PPP impose a similar bar on delinquent debtors. See 86 Fed. Reg. 

3698 (Jan. 14, 2021). This exemption request only applies to the bar in the DCIA and Treasury’s implementing 

regulations. 2 See 31 C.F.R. § 285.13(f)(3).
2

2. The number, dollar amount, and age of the debts in the program for which exemption is 

recommended. 

The information for each of the programs referenced above is as follows3:

Direct Loans

Age of Debt Outstanding Balance 

(billions)

Borrowers (millions)

<1 year 80.7 7.6

1-2 years 126.2 8.3

2-5 years 391.3 15.8

5-10 years 535.7 19.9

10-20 years 168.8 8.7

20+ years 13.5 0.7

FFEL

Age of Debt Outstanding Balance 

(billions)

Borrowers (millions)

10-20 years 218.5 9.5

20+ years 27.3 1.6

Unknown 0.01 0.002

Perkins Loans

Age of Debt Outstanding Balance 

(billions)

Borrowers (millions)

2-5 years 1.0 0.3

5-10 years 2.0 0.7

10-20 years 1.2 0.5

20+ years 1.2 0.5

3 This data includes loans outstanding as of December 31, 2020. Age is based on time since the earliest first

disbursement of a loan. At this time, the Department of Education is not able to provide data on HEAL Program 

loans or loans made under the Federal Insured Student Loan Program (a program that last made loans in 1984), 

which would otherwise appear in the data about FFEL loans. There may be some duplication of borrowers across 

programs and time in repayment groups.
3

TEACH Grants that have converted to loans

Age of Debt Outstanding Balance 

(millions)

Borrowers (thousands)

1-2 years 3.2 1.4

2-5 years 35.1 10

5-10 years 213.5 37

10-20 years 103.2 16.7

3. The reasons why an exemption is justified, including why the granting of financial 

assistance to persons owing the type of debt for which exemption is requested would not 

be contrary to the Government’s goal to reduce losses by requiring proper screening of 

potential borrowers.

An exemption for delinquent Federal student loans is justified because the exclusion of 

student loan borrowers with current delinquencies confounds the purpose of the PPP, and the 

impact of this exclusion falls disproportionately on sole proprietors, independent contractors,

and self-employed individuals – especially Black and Brown business owners – who are 

already less likely to receive PPP loans. The SBA shares these views and is planning to 

amend the PPP regulations, application forms, and guidance to remove this exclusion. An 

exemption under 31 CFR § 285.13 would enable the SBA to carry out the purposes of the 

PPP without prejudice to the Department of Education’s student loan programs.

PPP loans can give small businesses the help they need to stay afloat during this critical time

and to preserve jobs. Creating barriers to accessing PPP loans not only hurts small business 

owners; it hurts their employees, the communities in which they operate, and the entire 

economy. Excluding business owners who are delinquent on their Federal student loans 

frustrates the purposes of the PPP by excluding small businesses that could benefit greatly 

from the program and contribute to broader economic strength.

Addressing the exclusion of delinquent Federal student loan borrowers from the PPP would 

also help strengthen repayment of Federal student loans. Business owners who can keep their 

doors open and retain their employees during the present national emergency, which arose 

through no fault of their own, are likely to be in a better position to repay their Federal 

student loans in the future. Because PPP loans are designed to be forgiven, such loans are 

more likely to facilitate than impede repayment of Federal student loans when the current 

student loan payment pause ends.4 It is in the government’s interest to ensure that Federal 

student loans support rather than inhibit economic mobility or jeopardize financial stability –

especially during a national emergency and economic crisis.

Further, data from prior rounds of PPP funding suggest that Black- and Brown-owned 

businesses were less likely to receive PPP loans than white-owned businesses owners. The 

current round of PPP funding includes provisions intended to address this disparity, but 

excluding Federal student loan borrowers with delinquencies could undercut these efforts.

4 The Department of Education has suspended required loan payments, stopped collections on defaulted loans, and 

reduced the interest rate to 0% on Department of Education-owned loans until September 30, 2021.
4 

Black and Brown students rely more heavily on student loans than their peers and experience 

delinquency at disproportionately high rates. As a result, prohibiting delinquent student loan 

borrowers from obtaining PPP loans is more likely to exclude business owners of color from 

access to the loans their businesses need.

The Department of Education requests this exemption for new applicants, as well as for 

borrowers who have already applied for or received a PPP loan. The requested exemption 

would treat PPP borrowers with delinquent student loan debts equally, without regard to 

when they submitted their PPP application. Although PPP regulations required applicants to 

disclose whether they had a delinquent Federal debt, such as a student loan debt, in our 

experience, student loan borrowers are often confused about the status of their loans and 

whether their loans constitute Federal debt. This confusion may have led some borrowers to 

make innocent errors on their PPP application. The SBA shares this view and plans to amend 

the PPP regulations to remove the bar for delinquent student loans as it applies to previous 

PPP borrowers as well as new applicants. The government’s interest will be best served if 

Treasury provides an exemption that allows SBA to carry out its policy of treating all 

delinquent student loans consistently for purposes of the PPP. 

Taken together, it is the Department of Education’s position that exempting delinquent 

Federal student loans from affecting eligibility for PPP is in the best interests of the Federal 

government. I look forward to working with you on this matter. 

 

Acting Secretary of Education