Millions of borrowers will have to start repaying federal student loans again; Senators want to know if services are ready

Millions of people will have to start paying off their federal student loans – deferred during the coronavirus pandemic – in just two months. A group of Democratic senators want to know if four of the agents handling these loans are ready to support these borrowers, many of whom will be making loan repayments for the first time since the start of last year.

“This simultaneous restart of 32 million borrower loans, half of which will also be transferred to a new loan manager, marks an unprecedented event with increased risk of harm to borrowers,” reads a letter to chiefs of these managers signed by Senators Elizabeth. Warren, Chris Van Hollen, Richard Blumenthal and Tina Smith.

In August, the Biden administration announced it would push back the restart date for deferred federal student loans, previously set for October, to January 31, 2022 as the coronavirus pandemic continued to weigh on Americans’ bank accounts. To protect borrowers, the Education Department announced in October that it would require student loan managers to meet higher standards for performance, transparency and accountability from next year.

In the letter sent Thursday to Nelnet, the Oklahoma Student Loan Authority, the State of Missouri Higher Education Loan Authority and EdFinancial, lawmakers wrote “with the expected resumption of payments fast approaching, we are asking for a update on how your business is doing preparing for this historic transition to repayment while breaking the new higher bar to support borrowers. ”

Senators want to know how the servers will allow borrowers to smoothly return to repayments, how many cycles of outreach services have been completed so far before the deadline, how the servers communicate with those who are not signed up for repayments. automatic payments and what they do. to make sure borrowers are on the right track when payments resume.

Over the summer, before the administration extended the deadline, senators said all but one officer reported borrowers had gone more than a year without significant proactive outreach on their part. In response to a similar letter from June, service officers also said they needed more time, possibly 3 to 4 months, to hire and train some 57 to 900 people to adequately support borrowers.

Since then, two major federal student loan service providers have also announced that they will be pulling out of the federal student loan system, meaning millions of borrowers will also go into repayment under different companies than the ones they worked with. before the pandemic. Navient announced that he had been authorized to transfer 5.6 million loan accounts to Maximus. FedLoan, which also announced its withdrawal, announced a one-year contract extension last month that would make it easier for its student loan borrowers to transition into repayment.

At the White House on Thursday, press secretary Jen Psaki was asked if the Biden administration would extend the postponement of federal student loans beyond the Jan.31 deadline. She said she had no announcement about it and was not sure a decision had been made. When the January deadline was announced over the summer, the administration called it a “definitive extension”.

First published on December 2, 2021 / 2:59 PM

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