- Student debt payments are expected to resume in the coming months.
- This can result in a flood of calls to servicers who have been cut back due to budget cuts.
- Servicers are strongly encouraged to contact us now before payments are resumed to avoid long wait times.
Student loan borrowers are likely to for a very long timeif repayment resumes after a few months.
The Department of Education recently changed its contract with a loan servicer. This includes the reduction in wages earned by servicing each borrower and the minimum number of hours a customer service center must be open each week.
These cuts won’t come at the worst possible time, as tens of millions of borrowers may have to talk to their loan servicers when payments resume soon.
The Supreme Court continues to review the plan’s constitutionality. Judgment is expected in the coming months.
Servicers are the first person borrowers turn to when they need help with their student loans. Servicers help borrowers enroll in affordable repayment programs and manage other logistics of paying student loan bills.
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“It’s going to be a very busy few months at least, with long hold times,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a nonprofit trade group. “It’ll be another 30 minutes or two hours.”
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What changes has the Department of Education made that impair service?
Nelnet, a publicly traded company that owns two major student loan servicers, said late last month that 550 jobs cut Effective April 1, after the Ministry of Education changed its contract with the company. The changes included significantly lowering the price Nelnet gets per borrower each month and transferring 1 million borrowers to another loan servicer, Nelnet said.
These job cuts follow 560 people laid off earlier this year due to delays in returning students to debt relief and repayment programs. Servicers were actively hiring ahead of President Joe Biden’s “final” federal student loan moratorium, which ends on December 31, 2022. When that was extended again for his 60 days now or from his June 30 to his 60 days after the Supreme Court decision, whichever came first, servicers suddenly became overstaffed, Buchanan said. It is said that
Not only are there fewer people to help borrowers, but departments reduce minimum hours Its customer service center should be open every week.
Previously, Nelnet had to keep its contact center open from 8am to 11pm on Mondays, from 8am to 8pm on Tuesdays to Fridays, and from 10am to 2pm on Saturdays.
Currently, the company does not require the contact center to be open on Saturdays. In addition, Nelnet must operate two hours shorter on Monday, Thursday, and Friday nights.
Nelnet isn’t the only student loan servicer, but as a public company, we have to disclose these business changes. Buchanan said Nelnet is not an isolated case. He said the change was made “across all servicers.”
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Why is the Department of Education cutting budgets for servicers?
Buchanan said the agency spends much of its budget on implementing income-driven repayments (IDRs) and public service loan forgiveness, which has increased the number of payments made toward loan forgiveness for borrowers. And without additional funding from Congress for the Federal Student Assistance Administration (FSA), at the expense of millions of borrowers who need advice when student loan repayments finally resume, the Department will Cutbacks must now be made, he said.
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Why isn’t Congress allocating more funding to the FSA?
The White House was originally 2023 budget proposal, increase the FSA budget by one-third to $2.65 billion. Republicans reportedly responded with a 20% budget increase, provided that none would be used to implement student debt forgiveness if approved by the Supreme Court.
The White House has been reluctant, and the package passed in December did not see any increase in funding for the FSA.
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Is there anything the Department of Education can do to avoid customer service issues?
It is said that they are working on it.
“The department will continue to do everything in its power to better serve our students and borrowers,” said a spokesperson. “Resuming payments will require significant resources to avoid unnecessary harm to borrowers and we will continue to work with Congress to fully fund President Biden’s fiscal year 24 budget request. While these requests were not fully funded last year, they are a much-needed resource for Federal Student Aid to invest in much-needed improvements to student loan services.”
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Is Another Student Loan Payment Suspension Coming?
Bankrate.com senior industry analyst Ted Rothman said it could be paused again.
“Many people haven’t paid in a long time, so there may be a lot of questions,” he said. “The servicer may have changed. They may have had to reset their automatic payments, or they may have changed credit cards or banks. There is a lot of logistics and it can be a whole relearning process. I wouldn’t be surprised if it got pushed back again.How many “final” pauses were there? ”
Regardless, another delay cannot prevent the inevitable, Buchanan said.
“Time doesn’t solve the problem,” he said. “Rentals won’t have to pay for the next few months, but it won’t have a big impact on reopening,” he said, noting that people have shown little interest in preparing so far. Plus, he graduated during the freeze 7 million never paid and needs help.
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What can borrowers do to avoid long waiting times?
Contact your loan servicer now before repayments resume.
The Department of Education has instructed servicers not to contact borrowers about loans yet, but borrowers should contact servicers to verify personal information, loan amounts and payment plans ahead of the expected onslaught. can do.
“If your income changes during the pandemic and you need an IDR change, we can still set them up,” Buchanan said. “You can talk to them about your options and get the paperwork done now. Plan this now. Don’t wait until the last minute as it will probably be even more challenging.”
Medora Lee is a money, markets and personal finance reporter for USA TODAY. You can contact her at mjlee@usatoday.com and subscribe to her free Daily Her Money newsletter where you can get personal her finance tips and news about her business every Monday through Friday morning.
