Student loan borrowers have been on a rollercoaster, forced through significant ups and downs, … [+] abrupt changes, and widespread uncertainty. More changes may be ahead.
With $1.8 trillion outstanding, student loan debt has been at the forefront of national debate over the course of the last two years. And student loan borrowers have been on a rollercoaster after being forced through significant and often abrupt short-term changes, while dealing with widespread long-term uncertainty.
Unfortunately, even more changes are ahead. Here’s what borrowers can expect in terms of student loan forgiveness, repayment, servicing, and scams in the coming months.
Last month, the Biden administration extended the student loan payment pause, interest suspension, and collections moratorium to January 31, 2022. The relief, which was originally enacted in March of last year, had been set to end on September 30 after several previous extensions. The Biden administration has repeatedly characterized the most recent extension as the “final” one — so don’t expect the payment pause to be extended again after January. This means that millions of borrowers will have to resume repayment on their student loans in February of 2022.
Between now and then, expect to receive a barrage of communications from the Department of Education and its contracted loan servicers regarding the resumption of repayment. The Department has already started sending out mass emails to borrowers warning them to “start planning for repayment.” Expect a lot more of this kind of correspondence in the coming months. Make sure to update your contact information, and start evaluating your repayment plan options.
Earlier this year, two major student loan servicers — FedLoan Servicing, and Granite State Management and Resources — announced that they would not be renewing their servicing contracts with the Department of Education. Their existing contracts expire in December. This means that the Biden administration will need to find new student loan servicers to take over approximately 10 million borrower accounts. The Department has not yet announced specifics regarding a plan or a timeline, but we should know more before the end of the year.
Borrowers should start preparing now for possible student loan servicing changes by updating their contact information, and downloading and saving pertinent student loan records and correspondence. Borrowers on track for Public Service Loan Forgiveness (PSLF) should be especially thorough in retaining their records. PSLF borrowers may also want to submit one final employment certification to get an updated count of qualifying PSLF payments before the transfer occurs.
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The Biden administration has used executive action to cancel nearly $10 billion in federal student loans over the course of the last eight months. The administration is using a “targeted” approach to student loan forgiveness by using existing programs (like Borrower Defense to Repayment and the Total and Permanent Disability (TPD) Discharge program) to enact mass student loan cancellation.
While these actions are resulting in very real, tangible benefits for tens of thousands of borrowers, it so far has barely scratched the surface in terms of outstanding student loan debt. Expect the Biden administration to come under increasing pressure to enact additional cancellation of student debt, not just through programs like Borrower Defense and TPD Discharges, but also through other troubled programs like Public Service Loan Forgiveness (PSLF).
Given the widespread upheaval and uncertainty surrounding student loans, the environment is ripe for scammers and other bad actors who want to take advantage of the confusion. Borrowers should be wary of companies offering services or outcomes that sound too good to be true, particularly if it involves paying unreasonable fees. Some of these companies try to trick student loan borrowers by pretending to be affiliated with the Department of Education.
Borrowers should only communicate with their loan servicer and the Department of Education regarding their student loans. Borrowers can check to see who is servicing their federal student loans through the Department of Education’s web portal. If you need professional, legal, or financial help with student loan debt, try to work with a licensed, regulated professional such as a certified public accountant (CPA), a licensed attorney, or a certified financial planner (CFP) and verify their licensure status, disciplinary record, and insurance coverage.