Things are starting to get crazy for borrowers, servicers, and Department of Education employees.
President Biden announced loan forgiveness, but it faces legal challenges, and we have already seen some changes.
Limited-time programs are coming to a close, repayment for all borrowers begins in a couple of months, and uncertainty is everywhere.
What we do know for certain is that when repayment starts, it will be a mess. Federal servicers cut staff at the beginning of the pandemic, and they will likely struggle to fill their call centers. Even if they do hire more people, they can’t help borrowers unless they have been trained.
Servicers expect to receive more calls in one month than what they normally receive in a year when repayment starts. The time for action on your federal student loans is right now.
Expiring Federal Forgiveness Programs and the Need to Consolidate
If you think Public Service Loan Forgiveness or Income-Driven Repayment Forgiveness is a possibility, you should probably call your loan servicer right now.
Last year, the Department of Education announced the Limited Waiver on Student Loan Forgiveness. This program helps borrowers who had ineligible loans or were on the wrong repayment plan. However, to benefit from the Limited Waiver, some borrowers need to consolidate their federal loans, such as those with FFEL loans. If you have questions about this program, call long before the October 31, 2022, deadline.
Likewise, the Department of Education also announced an update to IDR payment counts. This update is scheduled to happen in January of 2023 — though this date could get pushed back to the summer. Here again, some borrowers may want to consolidate ahead of this deadline. Your servicer should be able to advise you accordingly.
Missing either of these deadlines could be very costly for borrowers chasing Public Service Loan Forgiveness or IDR Forgiveness after 20 or 25 years of payments.
Repayment Plan Enrollment
If you are happy with your monthly payment from March 2020, you probably don’t need to do anything. The Department of Education has said that the earliest any borrower will need to recertify their income is March of 2023.
However, if you want to change repayment plans or have questions about repayment options, now is the time to get these items squared away.
Before calling, check out the Department of Education’s Loan Simulator. This tool will give you a peek at your options.
If you wait until the student loan restart, it might be impossible to talk to a human to get questions answered. Even if you do get through, they may be in such a rush that a critical detail gets skipped.
Get All Your Questions Answered Now
If you have questions about loan forgiveness, payment procedure, auto-pay enrollment, or anything related to your student loans, ask those questions as soon as possible.
I hope I’m 100% wrong about this warning and that loan servicers can handle the influx of callers. Ten years of experience in student loans tells me that it will be awful.
If I’m wrong, you did some student loan planning a little earlier than necessary. If I’m right, acting now will prevent considerable headaches in the future.
Make Sure Your Servicer Hasn’t Changed
The roster of federal student loan servicers has changed since March 2020. Millions of federal borrowers will have a new servicer when repayment resumes.
For example, if you had FedLoan Servicing (MyFedLoan), your loans have likely moved by now. PSLF borrowers have been assigned to Mohela. Other borrowers got moved to Nelnet.
If you don’t currently know your federal loan servicer, now is the time to figure that out. You don’t want to miss any critical updates, and you want to make sure the repayment restart is smooth.
If you are unsure of who services your federal loans, the Department of Education keeps a detailed database of all federal loans and the servicer assigned.