Loan payment

How Biden plans to make it easier to resume student loan payments: report

  • The Department for Education plans to introduce flexibilities for student loan borrowers when payments resume in May.
  • They include a grace period for those who are in arrears, as well as expanded customer service for borrowers.
  • But many borrowers still worry that they won’t be able to pay another monthly bill in a few months.

The Department of Education has acknowledged the challenges associated with resuming student loan repayments after a two-year pause and has a plan to ease repayment for 43 million federal borrowers.

It came after President Joe Biden extended the pause on student loan payments just before Christmas. It included a waiver of interest and marked the third such postponement, until May 1. This gave borrowers an additional 90 days of relief, which is already set to expire in a few months.

As that deadline approaches, Biden has officially said that borrowers should “do their part” in preparing for a resumption of payments. But in a new report published on January 27, the Department of Education told the Government Accountability Office (GAO) that it would be “difficult to motivate” borrowers to resume payments after two years.

That’s why the department is implementing flexibilities for borrowers, as noted in the GAO report.

“As borrowers face student loan bills for the first time in more than two years, getting borrowers to resume payments and avoid defaults or defaults will be a significant challenge, officials said. ‘education,’ the report says. “Education has planned to ease this transition by temporarily not reporting missed payments to credit rating agencies. In addition, Education provides borrowers with additional flexibilities during the early stages of resuming repayment.”

Temporarily not reporting missed payments was part of the “safety net” the department would have prepared for borrowers when payments were due to resume in February. When borrowers fall behind on payments, it can negatively impact their credit rating and lead to wage garnishment and the withholding of federal benefits, among other things. Therefore, allowing a grace period will give borrowers some leeway to get back on track.

Other flexibilities GAO has reported the department will implement for borrowers include:

  • Simplify income-tested repayment plans by removing the requirement for borrowers to recertify their current income and family size for six months after payments resume.
  • Expand customer service by requiring student loan companies to add evening and weekend call center hours.
  • And require new hires to student loan companies to obtain federal licensure and undergo substantial training to ensure they are well equipped to help borrowers.

These flexibilities are accompanied by awareness campaigns by the Department of Education with student loan borrowers, including targeted outreach to those at risk of falling behind on payments once payments resume.

As Insider reported, the Department of Education acknowledged to GAO that it will be difficult to get borrowers to repay their debt after a two-year pause. Even before the latest extension, the ministry announced it would ease the administrative process for income-based repayment plans as part of its temporary changes.

And it is ultimately unclear how effective these relief measures will be when it comes time for borrowers to pay off their debt on May 1. Some borrowers told Insider they don’t think they’ll be able to pay another monthly bill in just a few months, and lawmakers argue Biden should use the extra time from the extension to forgive student debt and give borrowers permanent relief.

Dozens of Democratic lawmakers wrote to Biden last month that “eliminating debt before the end of the hiatus is a common-sense step so that millions of borrowers have more wiggle room in their family budgets and that our national economy is no longer held back”.