Student loan ‘train wreck’: As payments return, servicers will have less staff

Student loan borrowers in the U.S. are facing a “train wreck” as they prepare to resume payments on their debts - this is because many student loan servicers will be left with fewer staff to handle the huge demand. This situation is created by the government’s pause on student loan payments during the pandemic, which is set to end in October, 2021. Many servicers have opted to layoff staff after payment deferments are lifted, leaving a potential staffing shortage when borrowers return in numbers to resume monthly payments. This backlog could cause payment processing errors and delays, and borrowers could face unnecessary fees or even default. Experts also note that while enrollment in student loan repayment plans like income-driven repayment is increasing, servicers have not been hiring or training new staff. It’s not all bad news, however, there are steps borrowers can take to mitigate the effects of any lapses from servicer, such as being proactive in monitoring accounts, and considering consolidation or refinancing of their loans. The long-term solution, experts say, requires the U.S. government to step up and help by providing more funding to agency servicers. For those unable to meet the payment requirements following October, 2021, it is advised that they communicate with their loan provider as soon as possible for hardship options. The problem could even act as a catalyst to accelerate various proposals to assume or forgive student loan debt, which is currently over $1.7 trillion.

The resumption of student loan payments when the United States is still grappling with the aftermath of a pandemic is a tricky issue. Thousands of borrowers will return to make their monthly payments, possibly with fewer people at the helm managing their accounts. While the provision of relief funding to servicers may be a long-term solution, for borrowers, working hand-in-hand with their loan provider will be key to staying on track with their payments. This may also provide the push needed for the proposals for student loan debt assumption or forgiveness to be fast-tracked. In summary, paying back student loans is about to become very complicated – but there are steps you can take to mitigate any problems that may arise.