- Federal student-loan borrowers are once again facing monthly bills.
- But some borrowers should not be required to enter repayment.
Student-loan payments have resumed, but not all federal borrowers should be making payments.
After over three years, pandemic relief for borrowers has ended — interest began accruing on balances in September, and bills are now starting to become due. Most borrowers who were in repayment prior the pause are likely facing a monthly payment once again, and President Joe Biden's Education Department recommended that borrowers who can afford to make payments do, as to not suffer consequences of interest capitalization and negative credit scoring.
However, it's in some borrowers' best interests to not make payments — even if their servicer has given them a billing statement. Legal organization Project on Predatory Student Lending wrote on X, formerly Twitter, that three groups of borrowers should not have to enter repayment:
Those who were a part of the Sweet v. Cardona settlement that discharged debt for 260,000 defrauded borrowers
Those who have submitted a borrower defense application
And those who were a part of a group discharge brought on by the Education Department.
Additionally, those who have received notice of relief through income-driven repayment or Public Service Loan Forgiveness account adjustments after September 1 should continue making payments, the Education Department said — but borrowers who make overpayments will receive refunds.
Borrower defense applications are claims borrowers can file if they believe they were defrauded by the school they attended, and if approved, their loans from that school would be wiped out. While borrowers can submit those claims individually, the Education Department has also announced relief for groups of defrauded borrowers without them needing to take any action themselves.
For example, last year the department wiped out $5.8 billion in student debt for all remaining borrowers defrauded by Corinthian Colleges. However, servicers have been unable to process relief for all borrowers who received notice of their relief, and while those borrowers are entitled to an administrative forbearance as the relief processes, some are still getting hit with billing statements.
The Project on Predatory Student Lending wrote in a letter last month that after a borrower received notice in February that his loans would be canceled through the Sweet v. Cardona settlement, his servicer "recently placed Borrower 3's loans into repayment status, and his account shows that he owes over $600."
If borrowers received notice of relief but are still in repayment status, they can contact their servicer, or Federal Student Aid's ombudsman.
Borrowers who did not receive notices of relief but are struggling to make payments can make use of the 12-month "on-ramp" period during which missed payments will not be reported to credit agencies. However, interest will still accrue during that time, and the Education Department cannot control how credit scoring companies interpret the missed payments.
Even before payments resumed, borrowers have been faced with a range of hurdles. Student-loan servicers have struggled to managed repayment and have left borrowers waiting for hours on end to get help, sometimes to no avail. Some borrowers have also reported inaccurate billing statements and long processing times for their paperwork, leaving them in limbo without a clear answer on what they owe each month.
That's why a group of state attorneys general recently called for all borrowers with account issues to be placed on administrative forbearance — without accruing interest — until their servicer fixes its errors.
"In the weeks ahead, as borrowers enter repayment, many will need information and assistance," they said. "We are deeply concerned that the infrastructure to support federal student loan borrowers is not sufficiently robust to adequately respond to this need."