- Navient has just become the third student loan company to announce its intention to terminate its services.
- That means 16 million borrowers will pay off their student debt to new businesses next year.
- But despite the administrative burden that this represents, the date of restarting the payment of February 1 remains.
When President Joe Biden announced in August that he was extending the freeze on student loan payments for the “last” time, he had no idea that another student loan company would end up shutting down, placing a total of 16 million borrowers in the hands of new businesses.
But despite the added administrative burden of transitioning millions of borrowers and in addition to resuming payments for 43 million Americans bearing the $ 1.7 trillion student loan burden, the date of resumption of payments from the 1st February remains.
“We will continue to work to ensure that all of our borrowers can benefit from a successful return to repayment,” a spokesperson for the Department of Education told Insider. “The ministry expects student loan payments to resume after Jan. 31, 2022,” the spokesperson added, when asked if the business closures would change the schedule.
The Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources announced in July that they will end their service contracts this year, which will have a total impact of $ 10 million. borrowers. And on Tuesday, Navient – which serves 6 million federal student loan borrowers – announced plans to do the same, pending Department of Education approval.
Massachusetts Senator Elizabeth Warren, who has held student loan companies accountable for years, said borrowers can “breathe a sigh of relief” after the PHEAA closes, and after Navient’s announcement, she said. said borrowers would be “much better off”. “
Richard Cordray, the head of the Federal Student Aid (FSA) office, suggested at a conference in September that companies were shutting down so they didn’t have to comply with more accountability standards. high under Biden, although he did not mention specific company names. .
The extension of the final payment break brings “a serious sense of urgency” to the reform
While the department spokesperson told Insider it has made “several successful service agent transitions” over the past few years, lawmakers and borrowers are concerned about how the transition to new ones. agents and the return to repayment will have an impact on borrowers given the minimum information available to the department. put forward so far.
On Tuesday, senior members of the House and Senate education committees, Representative Virginia Foxx and Senator Richard Burr, sent a letter to Education Secretary Miguel Cardona saying they were ” deeply concerned “about the restart of payment.
“The lack of clarity and direction on the process surrounding borrowers returning for repayment is as troubling as the process is uncertain,” Republican lawmakers wrote. Cordray also noted earlier last month that borrowers “psychological hurdles” will encounter a reboot in payments after pausing them for so long – and hoping Biden can write off their debts.
Student loan payments have been on hiatus for the past year and a half, and this has provided tremendous relief for borrowers – especially for those financially affected by the pandemic. But that doesn’t mean they’re ready to resume those payments in four months.
Gwen Carney, a 61-year-old single grandmother with $ 75,000 in student debt owed to her own education, previously told Insider that she “really wasn’t looking forward to February at all.”
“The restart of payments makes me very anxious because I sort of need to find that extra $ 200,” Carney said. “I just don’t have it.”
And the high interest rates on student loans don’t help, making it difficult for borrowers to dip into the amounts they originally borrowed.
“I’ve paid off almost all of my loans, but I still owe the full amount,” Alexandria Mavin, 32, who started with $ 117,000 in student debt, told Insider, has paid off $ 70,000 and still owes $ 98,000. . “It’s a never-ending cycle.”
Seth Frotman, executive director of the Student Borrower Protection Center, previously told Insider that the department’s firm Feb. 1 deadline means the system needs to be improved before borrowers are pushed back into repayment, signaling “a serious sense of debt. emergency that the department must respect. its promises. ”
The reform process is underway
President Joe Biden campaigned for the cancellation of $ 10,000 in student debt per borrower, as well as for reform of student loan forgiveness programs like the Public Service Loan forgiveness program (PSLF), which rejects 98% of applicants. Its promise of blanket cancellation of student loans has yet to be kept, but reform may be underway.
The president is slowly adding to his ranks student loan advocates who have cracked down on student loan abuse in the past. On Thursday, Rohit Chopra was confirmed as head of the Consumer Financial Protection Bureau (CFPB). Previously, he was the agency’s first student loan ombudsman, during which he ensured borrowers were protected and in some cases took legal action against student loan companies misleading borrowers.
Massachusetts Senator Elizabeth Warren, who created the CFPB, told Insider that student debt cancellation will ensure borrowers don’t face predatory student loan behavior, referring to stocks de Navient who urged borrowers to abstain.
“At the end of the day, the student loan system is broken,” Warren said. “The only way to ensure that borrowers don’t face the same predatory behavior from Navient’s replacement is to write off student debt, so that no borrower is held hostage by companies profiting from their financial distress. . “