On Your Mark, Get Set: Wait for Student Loan Payments to Resume

August 12, 2021

Updated 11/28/22: Since this blog post was published, payments and interest on federally-held student loans are now set to resume 60 days after a court decision on President Biden’s forgiveness program. If no decision has been issued by June 30th, 2023, payments will resume 60 days later.

As millions of student loan borrowers geared up to resume payments on October 1, the federal government extended the moratorium on federal student loan payments and interest one last time, through January 31, 2022. This date, and the extension itself, is final.

The long break has meant peace of mind for millions and has yielded significant savings: borrowers saved $7 billion a month, including $5 billion in interest alone, according to the Fed and the Department of Education.

While the extension is good news to many, it doesn’t erase the issues that complicate repayment, including major student loan servicers exiting the market and potential disruptions to long-term loan forgiveness and repayment plans.

Pros and Cons

While many student loan borrowers are relieved at the news and stand to save significant amounts in payments and interest, it means the goal posts have moved again. One of the biggest hurdles for the Department of Education to face in the next few months is that two big loan servicers, FedLoan Servicing and Granite State, will not renew their federal loan contracts. That means that 10 million borrowers, or roughly one in four people carrying student loan debt, will need to have their loans and records fully transferred to a new servicer by the time payments resume.

These announcements, combined with past uncertainties about whether and when repayments will resume, create even more doubt among borrowers. With a lack of clarity about who they can trust for accurate, timely information, they are potentially vulnerable to the student loan scams that are taking advantage of the uncertainty to dupe borrowers.

Hurry Up and Wait

This is the time to act for financial institutions and enterprises. These next few months are the last chance to have a solution in place by the time payments resume. Most borrowers won’t have made payments on their loans in nearly two years and will need to adjust to a new reality with an average monthly student loan payment of $400. If borrowers don’t act quickly to get payment assistance, they risk delinquency and even default on their student loans.

Institutions have the opportunity right now to support their member borrowers by providing tools and strategies to improve borrowers’ financial odds once payments resume. For example, some may opt to enroll in an Income-Driven Repayment (IDR) plan, before the flood of paperwork that will likely overwhelm loan servicers in February. For those whose loans are in default, the extra time may help to restore their good standing.

Borrowers with loans serviced by FedLoan and GraniteState can expect new loan servicers to be assigned by or before February—but no one knows exactly when. Organizations and financial institutions can help individual borrowers by sharing messages from the Department of Education about new servicers, and by planning ahead for a 4- to 6-week wait for savings and forgiveness-plan enrollment. Industry leaders who use a platform like Summer are well-equipped to provide clear and timely updates as they're announced—which could range from servicer updates to new repayment options or forgiveness criteria.

How to Help

Summer’s tools can help institutions and organizations alike navigate the next few months. HR leaders want to respond to workforce questions around student loan repayments. Financial institutions that offer borrowers a single, credible source of truth can earn their customers’ trust and loyalty by integrating student-loan support into their platforms.

Summer’s earlier recommendations remain current, despite the new deadline. HR leaders and financial institutions should encourage borrowers to:

  • Make sure loan-servicer accounts are current, even if a borrower’s new loan servicer is leaving the sector at the end of the year.
  • Re-certify IDR plans to confirm continued enrollment and PSLF eligibility.
  • Submit the PSLF employer certification form every year to guarantee that payments are tracked—a vital concern when a single misplaced payment can derail a 10-year repayment schedule. The months of paused payments will count toward forgiveness programs.
  • Print out a complete record of payments, along with any correspondence from loan servicers.

For borrowers who want to pay off their loans more quickly, this can also be a good time to continue making some payments while interest rates are set to 0%. Using this time to pay off the principal of loan balances can save a significant amount of money in the long run.

Steady Guidance in Unpredictable Times

It’s hard to know which timelines to question and which to trust. Regardless of what happens before February, Summer’s holistic approach to financial well-being delivers specialized resources and valuable guidance with a human touch.

Summer’s student-debt platform can help individuals accrue significant student-loan savings—up to $200 a month on average—and can help enterprises and financial institutions provide employees and participating organizations with tested, evidence-based digital tools to reduce individual obligations and define pathways to less debt and greater security.

When borrowers have less anxiety and more cash, it’s good for their companies, their communities, and the society we share. Enterprises and financial institutions have the opportunity to make a positive difference in millions of lives shadowed by long-term debt. We’re here for you, no matter the season: Summer can help.

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