“We Will Lose a Generation of Student Loan Borrowers”: Pressure Increases to Extend Payments Pause



When Catherine Bolton retired earlier this year, she entered her golden years with a commitment she hoped would be done away with by now: roughly $ 40,000 in student debt.

In the months since she quit her job as a mental health professional in elementary school, 67-year-old Bolton received a deferral to pay her monthly student loan bills, thank you to pause the era of coronavirus on student loan payments and interest. But she worries that there will be enough room in her budget if payments resume on schedule in October, and that payments will haunt her for the rest of her life.

“I’m going to get a fixed income with a low income,” she said. “I drive a 26-year-old car, but this model and year is known for its eternal drive, so I am grateful for that.”

Bolton is one of tens of millions of borrowers preparing to resume student loan payments, interest and fees from October 1st.

Catherine Bolton prepares to resume student loan payments.

Defenders as well as members of Congress, including Democratic Senators Chuck Schumer and Elizabeth Warren, are urging the Biden administration to extend the pause in payments out of concerns that the student loan system is not logistically ready to resume payments and that borrowers are not financially ready – a recent poll of 23,000 borrowers, a student debt advocacy group found that nine out of ten borrowers say they will not be ready to resume payments on their student loans on October 1.

Stakeholders raised these concerns each of the previous three times when a threat of new payments loomed. But the October deadline is the first time coming since the Biden administration, which pledged to revamp the student loan system, took control. Advocates say borrowers should not be asked to resume payments until officials deal with problems hampering the student loan program, including by paying off debts from borrowers already eligible for forgiveness.

“During the campaign, President Biden made many big promises about how he was going to fix the student loan system,” said Persis Yu, director of the Student Loan Aid Project at the National Consumer Advocacy Center. “It doesn’t make much sense to re-enable the student loan system before these fixes are made. We have a unique opportunity while there is a pause to make these changes. ”

In the past, when borrowers resumed their student loan payments after an interruption due to a natural disaster, new defaults – a sign that borrowers were not aware that payments had resumed, or were struggling to get into an affordable repayment program on time.

The resumption of payments in October will attract many more borrowers than those natural disasters.

“We are going to lose a generation of student loan borrowers who will never be able to return to the system and who will then have to face the devastating consequences of defaulting on their student loan obligations,” said Yu.

Are you a student loan borrower looking to resume payments? Waiting for your answer. Email jberman@marketwatch.com

“Why not give them a chance?”

The Biden Department of Education took steps to improve the student loan system, including by discharge $ 1.5 billion in debt from borrowers who were deceived by their schools and Giving help disabled student loan borrowers. However, advocates are demanding additional changes, including a massive write-off of student debt before payments are resumed.

“The department is working to improve the system. Why not give them a chance? “- said Yu.

Bolton’s story illustrates the hurdles that borrowers face when navigating the student loan system, whose advocates say the Biden administration must improve before payments resume. She is one of tens of thousands of borrowers Who fought to access government service loan forgiveness, a program that allows the government and some nonprofit workers to pay off their federal student loans after 120 timely monthly payments.

“We will lose a generation of student loan borrowers who can never get back into the system.”

– Persis Yu, Director of the Student Borrower Assistance Project at the National Center for Consumer Law.

Since 2009, Bolton’s student loan company has automatically charged it monthly on a monthly basis. Although she paid off her loans for over 10 years and worked as a mental health professional in a public elementary school during that period, she was twice denied PSLF due to technical reasons. Any payments she makes now that she has retired will not count towards benefits because she is no longer in the civil service.

Bolton, who lives in Lawrence, Kentucky, would like her to research the program and its requirements earlier: “I stuck my head in the sand foolishly, I just didn’t know how to deal with it,” she said, referring to debt – but the system is also to blame for the obstacles it faced, she said.

“When she consolidated her loans in 2009, there was no dialogue that this existed,” Bolton said. Even when Bolton hired her student loan company in recent years to help navigate the program, including filling out an application form with a representative over the phone, Bolton received conflicting information depending on who she spoke to. “I felt like I couldn’t get a straight answer,” she said.

The deceived students are still waiting for help

According to Yu, the problems that government officials like Bolton face getting promised aid indicate broader problems with the student loan system, including borrowers being forced to use “overly restrictive” rules that are bad about report.

“These very convoluted paths” mean that “borrowers must be impeccable to receive the relief they are legally entitled to, even if they are in the spirit of what the laws were designed to do,” she added.

Department of Education of the Biden era started digging deeper the problems that civil servants face when trying to get forgiveness. Education Secretary Miguel Cardona told the senate group in June that the high rejection rate of PSLF applicants was “unacceptable”.

Advocates argue that before the student loan system turned its back on borrowers who were owed payments, including government employees, students who were defrauded by their schools, and borrowers who were permanently disabled.

Defenders argue that before the student loan system turns its back on borrowers who are owed payments, including government employees, students who were defrauded by their schools, and borrowers who are disabled, they should be cleared of their debts.

Eileen Connor, director of litigation for Harvard Law School’s Predatory Student Lending Project, represents thousands of former nonprofit college students who have waited years for their claims for damages to be heard. Borrowers have the right to cancel their federal student loans if they are misled by their schools through a process called borrower protection.

But according to a lawsuit filed on behalf of the students by Connor’s organization, under the direction of then Education Minister Betsy DeVos, the Department illegally suspended their claims. Although the Biden administration has written off roughly $ 1.5 billion in student debt held by nonprofit college students who were defrauded by their schools, thousands of people are still waiting for help and their claims must be reviewed before repaying student loans, Connor said.

“The knowledge that there are people who should not have their loans – or their loan commitments should not exist,” but who are at risk of receiving wages, tax refunds or social security benefits after unprecedented turmoil is “very frightening. Connor said.

“I know people like my clients are intimidated by this,” she added.

The pandemic has been particularly hard hit by the economic impact on Connor’s clients. In the year leading up to March 2021, about a third of 425 clients surveyed by Connor’s organization were applying for unemployment benefits. Nearly half of those surveyed either worked on their own or had a family member who worked on the front lines, such as a postal worker or a delivery driver, which put their health at risk.

“The people who are our clients, who have received loans from predatory schools that have done them more harm than help, have been disproportionately affected by the pandemic,” Connor said. “Basically, it’s shameless that they will again be in danger of reprisal, to receive the message that it is time to return to normal life, when the Department has not corrected this situation.”

Servicers ask for a plan

But these are not just drastic changes to the student loan system that stakeholders believe need to be undertaken before payments resume, they are also concerned about the lack of a plan to remove the logistics of including student loan payments for about 30 people. million borrowers.

“We’re waiting for the government to decide how it will do it,” said Scott Buchanan, executive director of the Student Loan Services Alliance, which represents the companies the government contracts with to manage the student loan program. “The department gave borrowers more time, and it gave itself more time, but it did not use that time to develop and deliver the plan – this is disappointing to us.”

“We are waiting for the government to decide how it will do it.”

– Scott Buchanan, Executive Director of the Student Loan Services Alliance.

Buchanan fears that without enough time to talk with borrowers about the logistics of renewing payments, student loan companies could receive an overwhelming number of calls on October 1.

“This will put a strain on the system,” he said. “I don’t think there are any resources and staff that we could do to accommodate 30 million people at the same time.”

Cardona told a Senate commission in June that the agency is “committed to giving these borrowers as much time as possible to travel.” Cardona also noted that the agency is “continuing to talk” about whether October is the “best time” to resume payments.

Historically, you need a solid plan to smoothly resume your student loan payments. When the system was initially shut down in March, borrowers’ calls dropped more often than usual and they faced problems getting information from service personnel, according to the June government accounting bureau. report… In addition, up to 5 million borrowers had their own credit ratings. inadvertently discolored due to a service error.


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