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Hurdles to Student Loan Repayment

Posted on Mar 15, 2023 9:31:41 AM | By The Attigo Team
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By Hannah Achtor, Attigo Senior Trainer

With the outlook for student loan repayment becoming clearer by the day, the obstacles borrowers will face once student loan repayment resumes are coming into view. Let’s take a look at some of the major hurdles student loan borrowers will face in the coming months.

1. Most borrowers haven’t been in repayment since March 2020.

Because of the student loan payment pause that’s been in place for the last three years, most borrowers have not been making payments.

  • Some were not required to make student loan payments during the student loan repayment pause and chose not to make any additional payments.
  • Some were still in school when the student loan repayment pause took effect and have never made a student loan payment.
  • Some had loans that did not qualify for the student loan repayment pause but did not realize they were still required to make payments.

These borrowers will suddenly have to find room in their budget for a monthly student loan payment, with limited notice (Source: studentaid.gov). With high levels of inflation and the price of everything increasing, an additional monthly payment could add another layer of financial stress to an already difficult time.

2. Many borrowers don’t know who their servicer is.

During the student loan repayment pause, loans for millions of student loan borrowers were transferred to other servicers. Unfortunately, borrowers often ignore communications alerting them to a transfer due to unfamiliarity with the name of their new servicer, leaving them unaware the transfer occurred. This leaves many borrowers in the dark in regard to who their servicer is or where to send payments once the student loan repayment pause ends.

3. The Student Loan Debt Relief Plan is causing confusion.

If you’ve been following the news, the uncertainty surrounding the Student Loan Debt Relief Plan is causing confusion for student loan borrowers. From court challenges to email errors, borrowers are left wondering when or if the proposed student loan forgiveness will take place. Lawsuits have blocked the rollout of President Biden’s plan until the court reaches a decision in the matter (Source: studentaid.gov). If the legality of the debt relief program hasn’t been resolved by June 30, 2023, payments will resume 60 days after that. With so many important details yet to be confirmed, it’s hard for even the most engaged and informed borrowers to keep track.

4. Many borrowers don’t know about the repayment plan options available to them.

One of the defining features of federal student loans is the flexibility in repayment plans. Federal student loan borrowers have the option to change repayment plans to suit their individual financial situation at any time, free of charge.

What’s the solution?

The best tool to overcome these hurdles is timely communication with student loan borrowers. People shouldn’t wait to take action. Servicers will be swamped when repayment starts and hold times may be long. Borrowers need to be proactive. To help them achieve student loan repayment success, schools, employers and financial institutions need to get the word out to them early and often on how to transition into repayment.

Point people to tools and resources.

  • gov. Find information on repayment plans, locate servicers, look up an FSA ID and get the latest updates on the student loan repayment pause, including a checklist on how to prepare for repayment.
  • Find a repayment plan. Take advantage of FSA’s Loan Simulator to find a student loan repayment plan that will work for their needs and goals once repayment begins.
  • Contact student loan servicers. Getting in touch with student loan servicers with questions ahead of the when repayment resumes can help borrowers get the help they need in advance.

Stay up to date.

In addition to getting students the resources they need, it’s important to stay on top of all the student loan changes and updates in the coming months. Be sure to follow news about student loan debt relief from studentaid.gov and other reputable news sources.

Find support services

As always, you can find additional industry updates and support services for borrowers at attigo.com/higher-education (for schools) and attigo.com/employers (employers).

Check out our Student Loan Repayment Assistance benefit page for more information.

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