Advertisement Protesters rally outside the Supreme Court in February. The Biden administration has tied the end of the student-loan payment pause to litigation surrounding its student-debt-forgiveness plan. Chip Somodevilla/Getty Images Email icon Facebook icon Twitter icon Linkedin icon Flipboard icon Print icon Resize icon Referenced Symbols Advertisement VOW -0.43% VWAGY +0.22% NFLX -1.60% Like millions of student-loan borrowers, Kate Eminger is in limbo.
She doesn’t know how much her student-loan bill will be when the years-long pandemic-era freeze on payments ends. Eminger’s loans were transferred during the pandemic to a new servicer, but she’s struggled to communicate with the organization, which could help her learn her monthly payment amount. She’s also rushing to take steps that could provide her access to a loan-forgiveness program for public servants.
“I am very nervous about them starting again,” Eminger, 37, who has about $175,000 in student debt, said of the loan payments. “There’s just a lot of uncertainty and murkiness around it, which for a loan amount of my size is pretty scary.”
After a more than three-year freeze, payments, collections and interest are scheduled to resume on federal student loans later this year. This is the ninth time — spanning two administrations — that the government has threatened to turn payments back on. Once again, borrowers, advocates and servicers are gearing up for a financial and operational headache.
“It’s going to be frustrating for everybody involved — borrowers, servicers, the Department of Education, advocacy organizations like ours,” said Betsy Mayotte, the president of the Institute of Student Loan Advisors, a nonprofit that helps borrowers manage their student loans.
To advocates who pushed officials to delay restarting payments in the past, this moment in many ways looks similar to the months before the freeze was scheduled to end those eight other times. A challenging economy means borrowers’ budgets are still tight and promised fixes to the student-loan system that could help ensure a smooth transition to repayment and make borrowers’ bills more manageable still haven’t materialized.
But a few key factors are different, some of which are upping the pressure on the Biden administration to turn the student-loan system back on: the official end to the pandemic emergency, congressional Republicans taking aim at the payment pause in two pieces of legislation and multiple lawsuits challenging the freeze. Other elements unique to this moment are exacerbating the uncertainty and challenges related to restarting payments. Servicers will have fewer resources than in the past to handle a likely crush of calls.
“The Department remains focused on doing everything in its power to better serve students and borrowers, and we are fully committed to supporting student loan borrowers as they successfully navigate returning to repayment,” a Department of Education spokesperson wrote in an email. “The Department is deeply concerned about the lack of adequate annual funding made available to Federal Student Aid this year,” the spokesperson said, referring to Congress’s decision not to increase funding for FSA, despite the agency’s request. “As the Department has repeatedly made clear, restarting repayment requires significant resources to avoid unnecessary harm to borrowers.”
For Eminger, and other borrowers, part of the anxiety surrounding the restart to payments stems from major upheaval to the student-loan system that’s been announced during the pause that will make her loans more manageable. But accessing these benefits requires both diligence — staying on top of announcements and paperwork — and patience while she and others wait for the full implementation of these initiatives.
“The rules have been changing so much,” Eminger said. “Before the pandemic I felt like I very much understood what I was required to do. I always felt very on top of it. Now it just feels like a completely moving target.”
Kate Eminger says she’s nervous about the looming resumption of student-loan payments. Courtesy of Kate Eminger Compounding her uncertainty is a lack of clarity surrounding exactly when payments will resume. In November, President Joe Biden told borrowers they could expect the pause to end in the late summer, but he didn’t give an exact date. In addition, it’s hard for Eminger to see how this deadline for payments to restart is different from all the others, where student-loan bills never materialized. All of that has made it difficult for Eminger to figure out exactly when to take steps to make sure her student-loan payment can fit in with the rest of her budget such as the sale of her car.
“It does not feel real at all,” she said of the restart of student-loan payments. “It would be great to name a date. If they could name a date and if that date felt certain then you could plan.”
Tied up in court The Biden administration has said that the freeze will end 60 days after litigation surrounding its plan to cancel up to $20,000 in debt for a wide swath of borrowers is resolved or 60 days after June 30, 2023, whichever comes first.
“When payments turn back on, it’s going to be a big problem,” said Eleni Schirmer, a researcher and organizer with the Debt Collective, a debtor activist group, “but to not even be granted the dignity of a clear date of when that happens just makes it even more of a problem.” She described providing a ballpark estimate for the restart of payments instead of an exact date as signaling an “almost cruel indifference” to how resumed monthly student-loan bills will impact borrowers.
That uncertainty could exacerbate the stress that student debt already places on borrowers, according to Daniel A. Collier, an assistant professor of higher education at the University of Memphis, who is studying the impact of student debt on mental health. What he’s found is that people who are the most uncertain about what’s going on with their student loan have the highest rates of psychological distress and suicidal ideation. For example, these borrowers worry they’re not getting an accurate sense of their balance or the number of payments they need to make before qualifying for a forgiveness plan.
“People are concerned about the pause because they don’t know what a restart looks like, this has never been done before,” he said. In the past, when payments have resumed after more limited pauses, delinquencies and defaults spiked — part of the Biden administration’s legal rationale for tying mass debt cancellation to the restart of payments. Borrowers don’t know “when it’s going to start, what their repayments are actually going to be,” Collier added.
Kevin Noonan, who together with his wife has about $100,000 in student debt, said he’s benefited from the pause. The couple has used the extra room in their budget to pay down private student loans. Still, Noonan is “frustrated” with the lack of clarity surrounding the resumed payments and the status of the Biden administration’s loan-forgiveness plan.
“Not knowing is the hardest part,” he said. “I have a Google alert set up, every time student loans come up I check everything. You kind of just have to plan for the worst-case scenario.”
Megan and Kevin Noonan have about $100,000 in student debt. Courtesy of Kevin Noonan As the Department of Education prepares to resume student loan payments, advocates and servicers are raising concerns about the lack of clarity surrounding the timeline and the resources available to servicers to ensure a smooth transition. The payment pause, which was put in place in March 2020, is set to end in July, but the exact date is still uncertain. This lack of clarity could create an obstacle to a seamless return to repayment, and servicers are working with fewer resources than previously anticipated. The Department of Education is also in the process of implementing several initiatives aimed at overhauling the student-loan system, including an overhaul of the student-loan servicing system and initiatives to make it easier for borrowers to access the forgiveness already available to them under the law. However, these initiatives won’t be fully realized before the end of the summer. As the Department of Education prepares to resume payments, advocates and servicers are raising concerns about the lack of clarity and resources available to ensure a smooth transition.The Biden administration’s proposed student loan plan, which aims to make student loan payments more affordable for borrowers, is facing delays. The plan, which was announced in August, is likely not to be ready by the end of the summer. The plan builds on an existing income-driven repayment plan called REPAYE and eligible borrowers who enroll in REPAYE now will have their monthly payments automatically updated as the terms of the new plan are finalized and implemented.
For many borrowers, the financial burden of resuming student-loan payments will be significant. Thomas Simons, a senior economist at Jefferies, estimates the return to repayment will cost borrowers about $18 billion per month. He sees the hit to borrowers’ wallets as analogous to the impact of a payroll-tax increase in 2013.
The amount borrowers are saving by not making student-loan payments accounts for about 2% of discretionary spending. Many borrowers will likely be juggling other bills, too, such as rent, groceries and other basic needs, which have risen since the advent of the coronavirus pandemic.
Kelly, a student-loan borrower from Charleston, W. Va., found a job in her field after graduating, but was laid off during the pandemic. She started working some side gigs and eventually launched a dog-grooming business. Despite the business’s success and her passion for it, it likely won’t be enough to cover her bills once she has to start paying on her student loan again.
The Biden administration’s proposed student loan plan is facing delays, leaving many borrowers in a difficult financial situation. The return to repayment will cost borrowers about $18 billion per month, and many will be juggling other bills, such as rent, groceries and other basic needs, which have risen since the pandemic. It remains to be seen how the Biden administration will address this issue and help borrowers manage their student loan payments.The tech sector has been on a tear lately, with megacap stocks like Apple, Amazon, and Microsoft leading the charge. Analysts say that Big Tech still has the power to extend the rally and weather an economic storm. This week, Disney+ and Hulu will be removing dozens of shows from their streaming services. rnrnPresident Biden recently said he likely has the authority to use the 14th Amendment to raise the debt ceiling, but it may be too late. With the economy slowly recovering, many are wondering if now is a good time to buy a house. One man wanted to buy a $40,000 car, but his wife said no. He then decided to take a different approach, and the results were unexpected. rnrnIt’s clear that the tech sector is still a major force in the market, and it’s important to stay informed about the latest developments. Whether you’re looking to buy a house or a car, it’s important to consider all of your options and make the best decision for your situation.