Here’s what student loan repayment will look like in May, after the payment break ends

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Last month, President Biden extended the ongoing student loan payment pause and interest freeze until May 1, 2022. As advocates and policymakers continue to debate further student loan forgiveness, the Biden administration is forging ahead in preparing to return to reimbursement this spring.

This week, the Government Accountability Office (GAO) released a report outlining the administration’s unprecedented plans to bring 40 million student borrowers — most of whom have made no payments on their loans for nearly two years — back into repayment. Here are the details.

Expect lots of letters and emails regarding student loan repayment

The Department of Education and its contracted loan managers should bombard borrowers with correspondence about the return for repayment. You may receive many emails, mail letters and phone calls, and the Department of Education should initiate the bulk of these communications. The Department will also update its website and use social media to notify borrowers of the return to repayment.

New flexibilities for borrowers in income-based repayment plans

The Department will introduce new flexibilities for the nearly 9 million borrowers who were repaying their student loans under an income-based repayment plan before the payment pause. According to the GAO, “borrowers with loans under an income-based repayment plan will not be required to recertify their current income and family size for six months after repayment resumes,” regardless of or the date of their usual annual recertification. Borrowers can, of course, always request a recalculation of their payments under an income-based plan due to changed circumstances at any time.

It is important to note that there may be a lag between the borrower’s recertification date listed on their StudentAid.gov account and the actual recertification date according to their loan officer. Borrowers may need to contact their loan officer for clarification.

The ministry will also allow borrowers to self-report their income this year, rather than having to submit official income documents, such as a tax return or pay stub. “Borrowers applying for a new income-based repayment plan or those already in a plan…can self-certify their current income amount and family size by phone or other means. offered by their loan officer instead of submitting an application and documentation of their income, which is usually required,” says GAO. This option is already available and 160,000 borrowers have so far self-reported their income via It is important to note that this is a temporary flexibility – borrowers will need to resume normal application procedures for income-driven plans in subsequent years.

Big Changes to the Student Loan Service Continue

The student loans department has been in turmoil for much of the last year as several loan officers under contract with the Department for Education announced their withdrawal, creating uncertainty for millions of borrowers .

Government-held federal student loans that had been managed by Navient have been transferred to Aidvantage, the new direct loan servicing division of Maximus, a company that has already contracted with the Department of Education to manage its portfolio. overdue loans. According to the GAO, the transfers from Navient to Aidvantage were completed in December.

Granite State Management & Resources, another loan servicing agent, also left the department’s student loan servicing space last year. The Department also completed the transfer of these accounts to other loan servicers in December.

FedLoan Servicing, which is the department’s current contractor for the Public Service Loan Forgiveness Program (PSLF), is currently in the process of exiting the federal student loan system. The Department has transferred hundreds of thousands of borrower accounts to its other managers, and later this year, MOHELA (one of these managers) is expected to take over the PSLF program. According to the GAO, “In January 2022, [the Department of Education] transferred 37% of student loan accounts from FedLoan Servicing, and [is] expected to complete all transfers by summer 2022.”

In anticipation of confusion and uncertainty regarding loan service transfers and return to repayment, several loan managers are planning to hire additional employees to staff customer service lines and process customer inquiries. borrowers. But it’s unclear how effective the additional staff will be. “Two of the seven repairers said the substantial increase in new hires could contribute to negative customer service experiences, as these employees may not have the experience to answer all the unique questions that may arise from the resumption of payments,” the GAO wrote.

Some borrowers are already experiencing long wait times and receiving inaccurate information from loan servicers, leading at least one federal agency to warn loan companies that there could be consequences for illegal conduct. .

Borrowers whose student loans were on direct debit

More than 5 million student borrowers were repaying their loans through a direct debit program before the payment pause took effect. But direct debit programs not automatically come back into effect. According to the GAO, these borrowers “will need to confirm that they want to continue to automatically pay their student loans when repayment resumes.” In other words, borrowers will have to re-enroll in direct debit – and many borrowers may not realize this yet.

The Department and its contractual loan managers plan to communicate directly with these borrowers through increased outreach. Borrowers will be “allowed to make their selection by clicking a link in their loan servicer emails without logging into their account and through other means, such as by phone or logging into their online account. “, according to the GAO.

Borrowers with federal student loans in default

Borrower advocates have argued that the Biden administration should automatically put borrowers who are currently in default on their federal student loans back into good standing when the payment pause ends in May, in light of a CARES Act provision. – which initiated the Pause of Payments and Suspension of Collections nearly two years ago – which stipulates that months of suspended payments can count towards a loan rehabilitation program. Rehabilitation is a federal program that allows borrowers in default to restore their loans to good standing after a minimum of nine monthly payments. The suspension of payments has been in effect for well over nine months.

But so far, there is no indication that the administration will automatically remove borrowers from default. Instead, the Department plans to undertake additional outreach activities to reach out to these borrowers to help them exit default through available federal programs. However, this can be difficult. The GAO notes that “the contractor who handles defaulted borrower loans initially did not have valid email addresses for approximately half of the defaulted borrowers. [The Department] recently started providing the entrepreneur with additional email addresses drawn from various data sources; however, email addresses are still missing for about 25% of defaulting borrowers.

After the pause in payments and suspension of collections ends in May, borrowers in default on their federal student loans may be subject to administrative wage garnishment, set-off from Social Security benefits, and seizure of federal tax refunds.

Further Reading on Student Loans

Biden could ‘make a decision now’ on student loan forgiveness, says key senator

Biden administration touts $15 billion in student loan forgiveness for 675,000 borrowers – more to come?

Student Loan Forgiveness Updates: New Changes Coming in 2022 for Public Service Borrowers

Income-based repayment: Advocates call on Biden to pass sweeping reforms for student loan borrowers

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