Recent customer service hours reductions by some student loan servicers have increased concerns that debtors won’t have enough assistance when returning to repayment after a median hiatus of more than three years.
As a result of Congress allocating the Federal Student Aid office around $800 million less than what the Biden administration had requested this year, there were already doubts about whether the crucial return to repayment scheduled for later this year would proceed smoothly. For the billing and other services related to federal student loans, the agency has agreements with a number of outside businesses.
According to CNN’s analysis of past iterations of the companies’ websites, EdFinancial Services, Advantage, and MOHELA have decreased the number of hours during which a borrower can contact a customer care representative on the phone. Currently, none of those three service providers offer Saturday hours.
The Department of Education amended its current contract, “significantly” lowering the amount it collects per borrower per month, according to Nelnet, another key servicer, who claimed this in March. Nelnet’s website states that despite the company’s hundreds of layoffs this year, customer service hours have not changed.
The Department of Education was recommended to CNN by an EdFinancial spokesperson. It was impossible to contact MOHELA or Advantage for comment.
However, in an email to CNN, the Department of Education stated that it is “deeply concerned about the lack of adequate annual funding made available to Federal Student Aid this year.” The department declined to say whether it had changed student loan servicer contracts across the board.
“The Department remains focused on doing everything in its power to better serve students and borrowers, and we are fully committed to supporting student loan borrowers as they successfully navigate returning to repayment,” it stated.
According to Scott Buchanan, executive director of the nonprofit trade group Student Loan Servicing Alliance, reducing customer service could lead to fewer customer service employees, fewer hours, and possibly longer processing times.
With the resources we have been granted, we’ll keep helping ED and borrowers, he said.
The tweet below confirms the news:
What May Borrowers Anticipate?
Due to a pandemic-related suspension that was repeatedly extended by both the Trump and Biden administrations, federal student loan borrowers have not been required to make any payments since March 2020.
Since the US Supreme Court heard arguments about the Biden administration’s separate, one-time forgiveness program at the end of February, the administration has linked the payment restart date to that case. If approved, the program will provide eligible borrowers of federal student loans with debt relief of up to $20,000 each.
Federal student loan payments are scheduled to start up again either in late August or 60 days after the Supreme Court releases its decision. The judges are anticipated to make their ruling in late June or early July, but it might happen sooner.
It is an extraordinary task to get about 44 million borrowers back into repayment all at once. How much they owe, when to pay, and how to pay it may be confusing for many people. Since they last made a payment, millions of borrowers’ student loans are now being managed by a different servicer. Financial penalties may be assessed for late payments.
The Institute for College Access and Success’ senior director of college affordability, Michele Shepard, predicted that there would be a lot of people in need and not enough assistance to go around.
Shepard advises students to contact their student loan servicer as soon as they have any inquiries about their loans, particularly if they are considering signing up for an income-driven repayment plan. These plans, which base payments on family size and income, can cut monthly payments but necessitate additional paperwork from borrowers.
Plans to Reform the System for Student Loans
The Federal Student Aid office has a lot on its plate this year, in addition to the restart of federal student loan payments.
The Public Service Loan Forgiveness program will be permanently altered by the Department of Education in July to make it simpler for government and nonprofit employees to be eligible for debt relief after making 10 years of payments. Loan servicing issues have long plagued the scheme.
The organization is also developing a brand-new income-driven repayment strategy with the intention of lowering monthly debt loads as well as the overall amount borrowers pay back over the course of their loans.
The Federal Student Aid office would have additional work if the Supreme Court permits the one-time forgiveness scheme to go through. Republicans made sure that the federal spending bill enacted by Congress late last year did not include any fresh cash for the execution of the forgiveness program.
The Free Application for Federal Student Aid, or FAFSA, is a form that college students must submit each year in order to be eligible for federal student loans, grants, and work-study funding. The Federal Student Aid office is currently working on a new, more user-friendly version of this form. The FAFSA is typically made available in October, but the updated form won’t be ready until December.
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