Student loan borrowers could face a sharp drop. It’s time to start preparing.
In the coming months, two major events could trigger massive disruptions to student loan borrowers. First, there are at least two major student loan providers – FedLoan Servicing and Granite State Management & Resources – recently announced that by the end of the year they will suspend the US Department of Education’s maintenance operations. This will result in about 10 million student loan borrowers’ accounts being transferred to new lending institutions in the coming months. More upheavals in student loan servicing could follow as other servicing firms also approach completion of their contracts or work on renewals.
Second, the current suspension of payments and interest on student loans expires on September 30th. The simultaneous renewal of payments for 40 million student loan borrowers is unprecedented, especially when combined with the simultaneous disruptions in student loan services. Biden administration reportedly considering a possible additional extension, but no decisions have been made yet. And at this stage, borrowers should assume that their student loans will be repaid in October this year until the administration decides otherwise.
Borrowers should start preparing for what is likely to be a violent fall. Here’s what you can do.
Update your contact information with student loan support
This may sound obvious, but it is very important that your student loan organization has up-to-date contact information associated with your account. Many borrowers have not had to pay their student loans or interact with their loan agent at all since March 2020, during which time millions of people have moved. The Department of Education will require detailed information to borrowers as the bills are redeemed. And if your student loans are transferred to a new loan servicing agent, this new service center will use whatever contact information is on file to contact you. Under most federal student loan bills, service companies are not required to track you down — they only need to contact you at your last known address.
Log into your borrower account with your current Student Loan Service Specialist and make sure your mailing address, phone number, and email address are up to date. Do the same for your account via the Ministry of Education’s web portal at StudentAid.gov…
Prepare to resume your student loan repayment
While it is possible that the Biden administration will further extend the moratorium on student loan payments, borrowers should adopt a “hope for the best, prepare for the worst” mentality and start budgeting to pay off. Borrowers should be able to resume their monthly payments in accordance with the repayment plan they used when the student loan suspension first took effect in March 2020.
But you can also apply to change your repayment plan. For example, for borrowers who have experienced shrinking income and can no longer afford a standard repayment plan, an income-driven repayment plan may provide more affordable monthly payments.
Student Loan Auto Debit: Be On The Lookout
Borrowers who were previously registered with the automatic debit program should be able to resume automatic payments with the same loan attendants when the moratorium ends. But it would be wise to evaluate your automatic debit registration and consult your loan agent twice before September.
Also, if you need to change your repayment plan because you can no longer afford your previous monthly payments, be sure to keep an eye on your student loan account. You may need to request a deferral or temporarily cancel your auto-debit registration to avoid debiting a large payment from your bank account, especially if there are any processing delays associated with your request for a repayment plan.
It is important to note that borrowers whose loans end up transferring to a new student loan service provider are likely to be forced to reinstate a new auto-debit registration with this new loan service organization. Your automatic write-off arrangement is unlikely to be carried over to a new service provider.
Income reconfirmation for student loan borrowers under income-based repayment plan
For student loan borrowers who are already using an income-driven repayment plan, in most cases your monthly payments should resume at the same amount as when your student loans were suspended last year. Borrowers using an income-driven plan usually have to re-confirm their income every 12 months, resulting in a change in their monthly payment. But many student loan services have pushed back typical annual recertification dates due to a moratorium on payments, in some cases as far back as 2022. Borrowers should contact their loan servicers for more information on their recertification commitments by September.
Student loan borrowers with an income-driven repayment plan may also be asked to recalculate or reduce their monthly payments at any time due to changed circumstances, such as reduced income, job loss, or change in marital status. Therefore, if your previous monthly payments were based on a higher income, you can apply for a decrease in that payment amount. If the moratorium does not last, borrowers must submit their applications by September to reduce the likelihood of delays and delays.
Government Service Loan Forgiveness: Re-Confirmation of Employment
Student loan borrowers on the road to Public Service Loan Forgiveness (PSLF), whose loans are usually serviced by FedLoan Servicing, may want to apply for the latter. Employment certification before the expected transfers to service, which will occur this fall. This will allow you to certify that your work is PSLF eligible and you will be able to receive an updated amount of eligible PSLF payments prior to the certification date. Borrowers may want to do this before September, before loans start being transferred to new lending institutions. Be sure to keep copies of all PSLF-related correspondence.
For government student loan borrowers whose loans are not yet serviced by FedLoan Servicing, it may actually make more sense to refrain from certifying their work. Filing a PSLF Employment Certificate will usually result in the borrower’s student loan account being transferred to FedLoan Servicing if not already posted there. Whether that makes sense now or not is a personal decision, but since you might be looking at multiple servicing transfers – first in FedLoan Servicing and then back to the new service center, it might make sense to wait until the dust has settled.
Watch out for fraud
There are many fraudulent student loan companies that seek to cash in on student loan borrowers. It often sounds like they are a formal organization working with the federal government. Borrowers should be wary of such fraud. These companies are likely to step up their activities in the coming months, taking advantage of the confusion and anxiety surrounding the service of transfers and the end of the pause in student loan payments.
Borrowers should be careful and only communicate with the service serving their student loans. To make sure that the student loan service is indeed real and legitimate, you can log into the Ministry of Education system. federal student aid websitewhich will provide details of your current student loan service center, including their name and contact information.