Student loan repayments are due in less than 70 days, but student borrowers don’t know when payments will start again.
Here’s what you need to know.
Sen. Elizabeth Warren (D-MA) and several members of Congress are demanding answers on restarting federal student loan payments after temporary student loan relief expires on May 1, 2022. Warren and others sent a letter yesterday to US Education Secretary Miguel Cardona, expressing concern that “borrowers may lack clarity on the timing associated with the resumption of payments”. That said, the Department of Education has made it clear that student loan relief will end on May 1 and hasn’t changed its mind. (Where Biden stands on student loan relief). Still, members of Congress want to ensure that “harm to borrowers is minimized during the transition” to student loan repayments.
(Student loan cancellation reduced to $25,000).
Congress worries about student loans as payments restart
Specifically, Warren and colleagues note that as of May 2, 2022:
- There will be the compulsory payment of federal student loan payments, the accumulation of interest and the involuntary collection of delinquent loans for more than 42.3 million borrowers. (Biden canceled $15 billion in student loans).
- About 63% – or 26.6 million of these student borrowers – will immediately begin repaying their student loans.
- About 7.2 million borrowers have student loans in default.
- According to a recent survey, 37% of student borrowers said they were “not at all confident” about their ability to repay their student loan at the end of the student loan repayment break.
- About 50% of federal student loan borrowers are at increased risk of default.
- More than 12 million student borrowers are abandoned by three major student loan servicers. This means that these borrowers will start repaying federal student loans again with a new student loan manager.
(Bernie Sanders wants Biden to cancel all $1.8 trillion student debt)
Student Loan Questions: Restarting Student Debt Payments
Here’s a rundown of the questions members of Congress want Cardona to answer:
- What is the earliest date student loan payments are due? (Will student loan repayments be postponed until 2023?).
- Will all borrowers have the same payment due date?
- When are student borrowers considered delinquent if they fail to repay their student loan?
- When will late fees be charged?
- Will borrowers who default on their student loans have an impact on their credit report? (3 ways to get student loan forgiveness now).
- When will borrowers be subject to wage garnishment or other involuntary collections?
- Will student borrowers who were in default before the payment pause have their loans rehabilitated before payments restart? (Here’s Who Won’t Get Student Loan Forgiveness).
- What processes are in place to prevent borrowers from going into default, being charged late fees, triggering negative credit reports, receiving collection notices, being in default and being submitted to involuntary recoveries?
- Since the Department of Education does not have valid email addresses for millions of borrowers, how does it plan to notify these borrowers and protect them from student loan defaults?
(The student loan forgiveness could be the reason the Democrats lose the midterm elections).
Student loans: next steps
According to the White House and the Education Department, federal student loan repayments will resume after student loan relief ends on May 1. While some progressive Democrats in Congress want Biden to extend student loan relief through the end of this year or potentially next year, Biden has not changed his position. While it’s possible the Biden administration will change its stance, there’s no indication that will happen. As such, student borrowers should prepare for the restart of federal student loan repayments after a two-year payment pause.
Here are some popular ways to pay off student loans faster: