Millions in the dark about whether student loan payments will resume

Representative Ilhan Omar (D-MN) joins activists in a demonstration outside the White House entrance calling for student debt cancellation in Washington, US on April 27, 2022.

Evelyn Hockstein | Reuters

Planning his budget for next month, Scott Heins doesn’t know if he’ll have the usual cash he needs for his health care expenses and recently, thanks to inflation, his higher grocery bill.

That’s because, like tens of millions of other Americans, you don’t know if your student loan bill will come due.

“It’s just been radio silence from the Biden administration,” said Heins, 33, a freelance photographer from Brooklyn, New York, who owes more than $20,000. “It’s frustrating and stressful.”

Most federal student loan payments have been on hold since March 2020, when the coronavirus pandemic hit the US and paralyzed the economy. Former President Donald Trump extended the break several times, as did President Joe Biden.

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“Another payment freeze is inevitable”

Earlier this month, White House press secretary Karine Jean-Pierre said Biden would make a decision on the student loan payment pause at the end of the month. The president has also said he would announce how he plans to move forward, if at all, with student loan forgiveness before then. He has supported the $10,000 write-off for all borrowers, but is under intense pressure to provide more relief.

There are now just two weeks left before federal student loan bills resume, and while there is much speculation that another extension is likely with no plan to restart payments in place and the upcoming legislatures of November, the White House has not said anything more about it. .

“The fact that they haven’t issued any guidance so close to the theoretical start date pretty much indicates another payment freeze is inevitable,” said Barmak Nassirian, vice president of higher education policy at Veterans Education Success, a group of defense

Borrowers are not ready to resume payments

Restarting federal payments without more communication with student loan servicers and borrowers would lead to disaster in September, said higher education expert Mark Kantrowitz. After more than two years without payments, he said, many borrowers will need financial help or to make changes to their account.

“The servicers’ call centers would be overwhelmed with calls from borrowers who need deferments or compensation or who want to change repayment plans,” Kantrowitz said. “And with only a week or two’s notice, some borrowers would struggle to find enough money to pay the bill.”

Delinquency rates could rise, he added. In a March Student Loan Hero survey, almost three quarters of student loan borrowers said they were not financially ready to resume their payments.

Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, agreed that borrowers aren’t ready for payments to restart after so little guidance.

“The Department of Education needs to allow us to do our job of working diligently to educate borrowers about their options for a couple of months before payments start,” Buchanan said. “That’s not happening.”

A spokesperson for the U.S. Department of Education said the agency continues to assess the impacts of the Covid-19 pandemic and the economy on student loan borrowers, and will communicate directly with borrowers about the end of the payment break when a decision is made. .



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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!