Timing is everything, and Biden’s timing on the federal student loan payment and interest freeze has been awful.
To be fair, any decision on student loan relief will be controversial. All of the other pandemic relief ended long ago, but most borrowers are not ready to resume payments.
No matter what decision Biden eventually makes, many people (voters) will be angry.
Even when graded on a generous curve, the Biden Administration has still found a way to fail on the student loan relief extension decision.
Significant Changes Shouldn’t Happen at the Last Minute
Student loans are a massive financial undertaking for many American families. Finding money in the budget to restart payments will be a struggle in many homes.
One way that the government could help would be to provide plenty of notice for when the restart is going to happen.
We are now one month away from the scheduled restart, and borrowers still don’t know if payments will actually resume on September 1. The guidance given to servicers from the Biden administration strongly hints that another extension is coming. If the repayment restart happens on September 1, many borrowers will be blindsided.
Even if Biden does grant a last-minute extension on the student loan relief, it hurts the many families that panicked and sacrificed to prepare for a bill that wasn’t coming.
Waiting Makes Student Loan Servicing Worse
During the payment and interest pause, many student loan servicers cut staff.
When the restart happens, borrowers will overwhelm the servicers with calls and questions.
To do their job effectively, servicers will have to recruit, hire, and train enough staff to handle a large volume of borrowers calls. This process takes time.
If the servicers are unprepared for the restart, borrowers are again the victim. Long hold times and poorly trained customer service representatives make repayment more difficult.
Sherpa Tip: Even under the best circumstances, the repayment restart is likely to be a huge mess with servicers.
Borrowers should expect long wait times and frustration. If you can, get all of your student loan questions answered before the restart begins.
A Botched Restart Hurts All Taxpayers
Student loan borrowers owe the government over a trillion dollars on their student loans.
While there are very strong opinions on how the government should handle student debt, there is one fact that nearly all can agree upon: Botched management of student debt hurts borrowers and taxpayers.
If borrowers can’t get guidance from their loan servicers, they are more likely to go delinquent or default on their loans. When this happens, it is devastating for the borrower and bad for the taxpayer.
A well-planned restart would increase servicer capabilities and reduce the number of borrowers who fall behind on their student loans.
What a Well-Planned Student Loan Repayment Restart Looks Like
Borrowers, servicers, and taxpayers all deserve some certainty.
The Biden administration attempted this approach in late 2021. When they extended the relief in August of 2021, they said it was the final extension and that repayment would resume for certain on January 31, 2022. The Delta-variant necessitated the extension until May 1, 2022.
At this point, Biden needs to pick a date and stick with it. Give borrowers and servicers plenty of time to prepare for the restart. Don’t give any hints or leave any room open for the possibility of another extension. We need certainty.
Because Biden has waited so long, moving forward with the restart on September 1 is ill-advised.
There shouldn’t be any suspense or mystery when it comes to student loan repayment.
The other question I have about my loans is this…I paid off my parent loans at the beginning of the pandemic causing my balance to drop significantly. MY loans are nearing their PSLF 10 year mark. When I go to myfedloan to figure out what my payment will be when/if payments resume – I have no idea and am unable to find it on the website. All I can find is the balance and the interest rate (currently zero). I cannot even plan since I can’t find the remaining payments.
If you are nearing your 10 years for PSLF and you made payments during the pandemic, you might want to ask for a refund on those payments.