Federal Watchdog Shows Concerns Over Student Loan Payments Restarting

Concerns Over Student Loan Payments Restarting are on the rise. The colossal disaster that experts have been predicting is coming to fruition as the first due dates on federal student loans draws near.  Servicing challenges are abundant and student loan borrowers, schools, and taxpayers will pay the highest price.

In a press release on NPR dated September 11, 2023, titled[1], “Student loan borrowers are spending a lot of time on hold, says federal watchdog”, the Consumer Financial Protection Bureau (CFPB) voices their concerns for over 40 million borrowers entering repayment at the same time.

In fact, the Student Borrower Protection Center (SBPC) has issued a call to action for borrowers to call their servicers at 2pm ET on Thursday, September 14, 2023, to see if the student loan system crashes.  To participate in this “test”, click Join us!

Participants are given the following CFPB instructions:

Find your servicer’s number below:

Great Lakes Educational Loan Services, Inc. 1-800-236-4300

Edfinancial 1-855-337-6884

MOHELA 1-888-866-4352

Aidvantage 1-800-722-1300

Nelnet 1-888-486-4722

OSLA Servicing 1-866-264-9762

ECSI 1-866-313-3797

Default Resolution Group 1-800-621-3115

Dial the number and ask the following questions:

“What would I pay every month on President Biden’s new SAVE plan?”

“Can I get Public Service Loan Forgiveness? What is the IDR Account Adjustment?”

“When do I have to start making payments again? When does President Biden’s on-ramp end?”

Top 11 Challenges with Restarting Payments

1. UNINFORMED CONFUSED BORROWERS Many borrowers still believe their loans were canceled and have made no effort to choose a repayment plan or make payments.  The messaging from the White House, U.S. Department of Education, and media outlets has been very confusing, and borrowers don’t know where to get accurate timely answers.
2. UNREPORTED DELINQUENCIES AND DEFAULTS The “on ramp” and “fresh start” programs that eliminated credit bureau reporting of delinquencies and defaults do not mean that borrowers are no longer responsible from October 1, 2023, to September 30, 2023. It means that the public will not know who or how many borrowers are not paying their student loans.  Borrowers could potentially go unreported right up to the day they are in default.  A default is defined as 361 days past the due date.
3. BORROWERS WHO HAVE NEVER MADE A PAYMENT Borrowers who graduated or dropped from school in the last three and a half years have never made their first payment.  These are the highest risk of default even when there is only a six-month grace period after leaving school.
4. INEXPERIENCED FEDERAL SERVICERS Some federal servicers have left the student loan servicing scene and have been replaced by inexperienced servicers as concerns over student loan payments restarting continue to rise.
5. MASSIVE LOAN TRANSFERS With the changing of servicers, over half of the borrowers, or approximately 22 million borrowers’ loans were transferred to a new servicer.  The borrowers may not even know where their loans are.
6. UNDERSTAFFED FEDERAL SEREVICERS servicers are short-staffed, and some laid off employees as recently as this spring.  After three and a half years of no payments, thousands of employees were let go and the challenges with hiring today have created worker shortages with the servicers.  On top of that, the U.S. Department of Education (ED) is tightening the budget and telling servicers to cut back on staff.
7. UNREALISTIC LONG-HOLD-TIMES Servicers don’t have adequate staff to answer all the borrowers’ calls. Some servicer’s voice messages say the hold time is more than 2 hours.  Many borrowers are on hold for many hours before being disconnected so they never actually talk to anyone.
8. AUTOMATED PAYMENTS MUST BE REINSTATED During the COVID hold on student loan payments; ED removed all automated payments (auto-draft).  All borrowers who want to make payments must set these up again.
9. MANY BORROWERS HAVE NOT CHOSEN A REPAYMENT PLAN Based on information released from the White House, less than 25% of borrowers entering repayment have either gotten their loans forgiven or chosen a repayment plan.
10. ACCRUING INTEREST IS CONCERNING While messaging to borrowers states that they don’t need to do anything even if they can’t make their payments, the interest started accruing on September 1, 2023.  ED has announced a negotiated rulemaking process to address concerns about student loan repayment and forgiveness; however, laws define the master calendar for publishing these as November 1^st to go into effect the following July 1^st.  This puts the soonest effective date on July 1, 2025.  A lot can go wrong in that amount of time.  The ball may drop because the applicable master calendar date is right before the next election.  If this is not resolved, will the accrued interest be capitalized?  Good question that has seen no answers to date.
11. CIRCLING SHARKS Companies are popping up claiming to “help” student loan borrowers.  This was prevalent during the “Obama Loan Forgiveness” era when victims were paying thousands of dollars to get help when the federal servicers to this for free.  Unfortunately, there were so many of them with information on the Internet that their deception appeared to be true.  Be aware of scam companies that ask to collect large amounts of money to process your requests.  There are reputable established companies that offer assistance for a reasonable fee if the borrower cannot get through to their federal servicers.  Do your research to make sure that you don’t fall victim to these scams.

The best advice for borrowers is to start making payments so that good credit and payment habits are established, and the debt will be paid sooner.

[1]Student loan borrowers are waiting too long for answers, says CFPB watchdog : NPR