One of the biggest sea changes in student loan programs is going on right now.
But it’s not going smoothly!
As early as September, people were reporting that borrowers who wanted to know about the status of their student loans as the long-term national repayment pause ended were having trouble for one simple reason:
The websites were down!
There were a lot of other problems, too, but the news that major sites for companies like Aidvantage had been “sporadically down” amid the flurry of activity widely expected as the system lurches back into gear.
Not only that, but the same report from Katie Lobosco at CNN (one that reported the web site problems) cites a backlog at the Federal Student Aid Office that now suddenly has to deal with a much bigger workload.
What it all adds up to is a lot of confusion…in addition to the usual chaos caused by negligent and sometimes fraudulent lenders.
We’ve reported before on a lot of these specific issues that bedevil borrowers.
Maybe the loan changed hands, and nobody notified the borrower.
Lenders or loan servicers might not apply applications correctly.
They might lose information, or just fail to communicate at all… for months!
Sure enough, last month, borrowers reported being on hold for hours over a series of days as they just tried to get any kind of clarification or confirmation on loan status.
Eligible Borrowers Denied – Or Delayed
Here’s another example – the Public Service Loan Forgiveness program that’s supposed to relieve debt according to government or non-profit employer status of borrowers, seems not to be giving eligible people of the concessions they deserve after applications.
If you look at a relevant report from summer of 2021, the Department of Education reported, at that time, a backlog of some 147,000 forms. That problem, according to more recent reports, has not been fixed. Listen to what one borrower told reporters at the time:
“It (loan info) just disappears into a void… there’s no transparency. There’s no communication. You just don’t hear anything for months and months. And you start thinking, ‘uh oh, did I miscalculate somehow?’”
Current reports note that Fedloan, the servicer for the PSLF program, is sometimes less than responsive, and unexplained delays are daunting to people who need to figure out what they owe now, (after the pause) and what they will owe going forward.
The Income Trap
Another big pitfall involves the requirement for yearly recertification of income.
Lenders and loan servicers have the right to ask borrowers to show them proof of income, like payment stubs or 1099s. (Nerdwallet shows how this is done.)
Legitimately, borrowers have to recertify every year.
But along with that right, the lenders have the responsibility to take that data, read it accurately, file it, and deliver the proper response. And too often, they just don’t do that.
One of the easiest ways to mess up a loan account is to simply not handle the information that’s coming in about income certification.
We see stories like this, too, where lenders or loan servicers might just deny something without even showing that they reviewed the data itself. And so, the loan account is completely, frustratingly, opaque.
The Waiting Game
One of the worst parts of this delay for borrowers is that they want to know if there is a gap between the end of the pause and any new forbearance or debt service program.
But if they’re just not getting any answers at all, they have no idea what to expect. Their loans are fundamentally in limbo, and that’s not acceptable.
Government Programs In Jeopardy
Zoom back out to the macro level for a bit, and what you see is that certain groups are trying to work against the Biden administration, which wants to provide comprehensive student loan debt relief for many borrowers in any feasible way.
There are two separate programs, the ongoing SAVE program, and the IDR account adjustment program that are under fire. Lenders and their reps, of course, are chafing at having to comply with any standard at all. And “think tanks” are coming to their aid with legal challenges.
Take a look at this legal analysis from Michael Lux at the Student Loan Sherpa, where the issue is well laid out with helpful visuals.
“Imagine, for a moment, a repair shop just down the road from a giant pothole,” Lux writes. “People passing through town keep hitting the pothole and bringing more business to the repair shop. When the government announces plans to fix the pothole, the repair shop sues to block the repairs. Does the repair shop have the right to sue?”
He notes:
“The analogy here is a bit simplified, but it illustrates what I see as the absurdity in the plaintiffs’ argument. I’d be surprised if the plaintiffs have standing and if the case moves forward.”
The above is just one example that shows how lenders and others are acting in bad faith, reneging on their responsibilities, and miscounting or misapplying data at will, denying borrowers the forbearance and options they deserve.
Don’t settle for anything less than a full accounting of your loan, and file complaints with the CFPB or other parties if lenders are giving you the runaround. If you’re responsible to pay, they are responsible to report!
