The Department of Education released initial data on loan repayment following the pauses during COVID-19, plus plans for additional loan forgiveness and changes to student loan servicing.
12/18/2023 2:20 P.M.
2.5 minute read
The Department of Education released a report on recently-resumed student loan payments, finding that 60% of the 22 million borrowers with a payment due in October made them by mid-November.
The remaining borrowers “will need more time,” according to a blog post from U.S. Undersecretary of Education James Kvaal.
“Some are confused or overwhelmed about their options,” Kvaal said. “We want to make sure borrowers know that our top priority is to support student loan borrowers as they return to repayment.”
Student loan interest resumed Sept. 1, 2023, and payments started Oct. 1 following a series of pauses during the COVID-19 pandemic.
More than 4 million of the 22 million borrowers making payments this fall owed a payment on their loan for the first time. The DOE’s data excludes borrowers who returned to repayment but did not have a payment due this October.
The DOE instituted a 12-month plan for borrowers whose payments resumed Oct. 1, ACA International previously reported.
Those who miss payments from Oct. 1, 2023, to Sept. 30, 2024, will not be “considered delinquent, reported to credit bureaus, placed in default, or referred to debt collection agencies” during that time, according to a DOE fact sheet.
The 12-month plan is essentially a forbearance for borrowers.
Student loan servicers contracted with the DOE will apply the forbearance automatically; however, the borrower will still receive a delinquency notice for the missed payment.
Kvaal also noted that the Saving on a Valuable Education (SAVE) Plan put in place this year will help borrowers with high debts and low incomes.
“The SAVE Plan is an income-driven plan, which means payments are set on a slide scale based on how much borrowers earn,” Kvaal said. “Already, more than 5.5 million borrowers are enrolled in the SAVE Plan, including 2.9 million who are protected from making any payments at all.”
In the future, the SAVE Plan will allow cuts to payments on undergraduate loans by half, and the DOE is developing new loan forgiveness programs through its regulatory process, according to Kvaal.
Last month, the Biden-Harris administration announced that it is reinforcing its plans to support student loan borrowers as they transition back into loan repayment, ACA previously reported.
The DOE has outlined a comprehensive framework aimed at enhancing oversight and accountability of student loan servicers to protect the interests of students, borrowers and taxpayers.
“We have given clear guidance to our student loan servicers that they will be held accountable if they don’t meet their basic contractual obligations to borrowers and the department,” Kvaal said. “We have created new capacity for the department itself to communicate directly with borrowers and launched data-driven campaigns for struggling borrowers.”
The DOE announced it is working on a permanent contracting approach to cement greater stability, servicer transparency, accountability and performance beyond the two-year period authorized by Congress, ACA previously reported.
Next year, the DOE will work on streamlining student loan repayment with its five contracted servicers, according to a news release.
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