Introduction
Type A personalities will often tell you – it’s always good to have a ‘plan B!’
Since the Biden administration has met with all kinds of desperate roadblocks from various people in government, think tanks, and private sector businesses, what can the president and his movement still do to help borrowers who are being taken advantage of by lenders?
Recent developments suggest a shift in approach to offer vital assistance to those most impacted by student loan debt in the post-COVID era.
Repayment Policies Reemerge
First of all, it’s important to understand the context in which this is happening:
Following a three-year pause on student loan debt repayment, everything that’s happening right now is brand-new. Millions and millions of borrowers are dealing with fresh financial challenges after delaying payments for so long.
The Current Situation
Despite the expectation of an organized resolution, many lenders and loan servicers are evasive, leaving borrowers stranded without essential information on owed amounts and loan statuses. This lack of communication hampers the negotiation of payment plans, as it takes both parties’ active involvement. That’s a problem!
In other words, if you have two parties, and one of them isn’t speaking, they can’t agree on a payment plan at all. It takes two to tango!
Misinformation from Lenders
In other situations, the lender just keeps saying something untrue, declaring, for example, that eligible plans were never in forbearance, and that the result is sky-high balances and payments, despite borrower evidence to the contrary.
Expert Advice
That’s why experts are saying “document everything.” Borrowers should keep close records of:
- Payment amounts and dates
- Original balance and how it is affected over time
- Communications with lenders or loan servicers
Such records serve as crucial evidence if disputes arise due to lenders’ misinformation.
A New Plan for Relief
Categories of Eligible Borrowers
With a new plan that’s more targeted, and more immune to legislative pushback, the Biden administration is offering relief to certain kinds of borrowers hardest hit by the process. “President Biden and I are committed to helping borrowers who’ve been failed by our country’s broken and unaffordable student loan system,” said U.S. Secretary of Education Miguel Cardona last month. “These draft proposals would build on the historic $127 billion in loan forgiveness, the Biden-Harris Administration has already approved for nearly 3.6 million borrowers. We are fighting to ensure that student debt does not hinder opportunity or prevent borrowers from realizing the benefits of their higher education.”
Here are some of the categories of borrowers who could see the best support from these new plans:
- Long-term payers still stuck with loans will get credit for their payment history, with adjustments to their accounts. Moreover, the new plan will target this kind of scenario, acknowledging the history of payments, and adjusting accounts accordingly.
- Borrowers with increasing balances due to interest and forbearance will also be considered.
- Those paying a large chunk of their income to debts will get relief to ensure fair spending on essentials like housing and healthcare. Furthermore, The Biden administration is attempting to put a ceiling on how much of take-home pay can go to this type of debt. This will ensure that workers get fair protection for their monthly expenses like housing and healthcare.
- Those borrowers who may not have understood how to sign up for opportunities for which they were eligible, and those facing the most dire financial hardship.
Knowing Your Rights is Key!
As a borrower, accessing accurate resources and information is crucial. Additionally, this new initiative emphasizes the advocates’ goal: ensuring you understand your eligibility and how to navigate the process. This is critical because many borrowers face challenges during applications, and some lenders dismiss their efforts even when they apply.
Conclusion
Numerous reports highlight borrowers spending hours in limbo, persistently chasing absent lender representatives on prolonged phone calls. Realistically, expecting individuals to make payments on an unresolved matter caused by someone else’s negligence is unjustifiable. Furthermore, many borrowers will qualify for programs designed to assist in managing the expenses associated with repaying student loan debt.
A good place to start is right here on this blog, where we keep detailing new developments, or with the Consumer Finance Protection Board, a federal office formed for just these sorts of consumer protections. Get educated about student loans!
