“Unless there is a robust, proactive and targeted campaign to borrowers, many may be unprepared to restart or begin repayment,” said Nate Blanchard, the director of financial services at Western Governors University, in a statement. By the time payments return in the fall, the CFPB expects more than 30 million accounts will have been assigned a new servicer. Thus far, more than 17 million student loan accounts have been transferred to different servicers since the pauses began. Nearly half – more than 2 in 5 – of the borrowers in the CFPB analysis are set to return to student loan payments with a new servicer.
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Borrowers may have to create new logins, re-enroll in autopay and/or update their payment information. While many transfers will go smoothly, many others likely won’t. The result: lots of loan transfers, which the CFPB warned “could complicate the transition to repayment” for the millions affected. Several larger servicers – companies that handle billing and other loan-related processes in this case on behalf of the Education Department – have exited their contracts with the department over the last three years. Money to build homes or pay other debts: How the student loan payment pause changed people’s lives Who is my student loan servicer? The CFPB said it’s critical they reach out to their loan servicer now to try to get help before their monthly bills rise with the addition of a student loan payment.
About 8% of borrowers haven’t been able to keep up with other loan payments, especially credit card or car loan debt.
Some borrowers are already behind on other bills even though student loan payments haven’t kicked in.When it comes to federal student loans, interest rates are generally tied to the when the loan originated and that rate is doesn't change, so recent hikes in interest rates would affect only the newest borrowers. Credit card debt and auto loans are part of what’s led to a rise in borrowers’ debt loads, but on top of that, the CFPB said, interest rates on other debt could be rising, adding to borrowers’ debt. Half the borrowers who will have to start making payments in a few months have at least 10% more debt than they did before the pause, the Consumer Financial Protection Bureau said this month. Borrowers have more debt than they were before the payment pause.What is the state of student loan borrowers now? Here are some factors for borrowers to keep in mind as they prepare to start paying off student loans again. Supreme Court’s ruling that undid President Joe Biden's plan to forgive up to $20,000 in loan debt.) Some observers worry loan servicers will struggle to keep up with debt holders' questions given the federal Education Department didn’t get any more money this year even with so much going on in the student loan arena. (The end of the payment pause, extended by the Biden administration repeatedly, is separate from the U.S. Plus, a legion of borrowers whose loans only came to be after the pandemic set in have no experience making payments at all. That could be confusing for some borrowers. And for about 40% of borrowers, the company that handles their payments will be different than before the pause. Some of them are falling behind on those payments even without having added a student loan bill to their monthly budgets. That will be critical for many borrowers, who haven’t had to make student loan payments in about 3½ years, since the pause was first created by the Trump administration at the outset of the COVID-19 pandemic.ĭuring that time, about half of the 43 million people holding some $1.6 trillion in federal student loan debt have borrowed even more – in the form of car loans or mortgages or credit cards, the Consumer Financial Protection Bureau said this month. However, they say, there’s still time to prepare and even apply to see if you can keep your payments as low as they have been: nothing. When billions of dollars in student loan payments come due in October, economists and advocates warn it could be a jarring experience for tens of millions of people. Watch Video: Student loans: Tips before post-COVID payments begin
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