Student-Loan Borrowers Shouldn’t Enter Repayment With Account Issues: Attorneys General
- Pandemic relief for student-loan borrowers is officially over.
- Borrowers are continuing to deal with issues in their accounts as they enter repayment.
- State attorneys general said those borrowers shouldn’t have to make payments until the issues are fixed.
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A group of state attorneys general don’t think student-loan borrowers should have to pay off their loans while struggling to get issues with their balances resolved.
Last week, 19 state attorneys general sent a letter to President Joe Biden and Education Secretary Miguel Cardona expressing “serious concerns” with the repayment process and the harm it inflicts on borrowers in their states.
They wrote that the unprecedented transition to repayment is leaving federal student-loan companies with difficulties managing call volume and borrowers’ questions. Additionally, the transfer of borrowers to new companies during the pandemic has resulted in account errors like inaccurate payment counts.
“While many of the problems associated with the return to repayment may not be avoidable at this stage, we believe the Department can and should do more to mitigate harm to borrowers,” they wrote. “Specifically, we believe the Department should instruct servicers to liberally place affected borrowers in non-interest-bearing administrative forbearances that count toward potential debt forgiveness while account issues are researched and resolved.”
The attorneys general said that borrowers were facing issues enrolling in Biden’s new income-driven repayment plan, known as the SAVE plan, and, in one circumstance, a borrower reported that their servicer removed them from a repayment plan without any notice, causing their monthly payment to surge from $759 to $6,843.
Pandemic relief for borrowers officially ended on October 1, when bills started becoming due after an over three-year pause. Interest also started building on balances in September due to the debt ceiling bill Biden signed into law in June that codified the end of the student-loan payment pause.
Over the past few months, borrowers have increasingly been struggling with their servicers as they began to prepare for repayment. As the attorneys general noted, borrowers are spending hours on hold with their servicer and limited Federal Student Aid funding is making it difficult to provide more resources to servicers to better assist borrowers.
“Student-loan programs are very, very complicated, and servicers do not have the funding that we would like to give them to better serve borrowers,” Under Secretary of Education James Kvaal previously told Insider.
In response to questions from a group of Democratic lawmakers in August, one student-loan company MOHELA said it expects servicing delays to continue “well into 2024.”
“Unfortunately, the immediate of return-to-repayment amid ever-increasing changes to the contract administration requirements and expanded training needs, combined with the lack of sufficient funding from FSA, means extensive servicing delays are a likely outcome,” MOHELA said.
The Education Department has not publicly commented on the attorneys generals’ request to place borrowers on administrative forbearance, without accruing interest, until issues with their accounts are resolved. But they said doing so is crucial as borrowers enter uncharted repayment territory.
“In the weeks ahead, as borrowers enter repayment, many will need information and assistance,” they said. “We are deeply concerned that the infrastructure to support federal student loan borrowers is not sufficiently robust to adequately respond to this need.”
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