How the Ed Department is preparing for student loan payments to resume
Higher Ed Dive
January 28, 2022
Natalie Schwartz
Dive Brief:
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As the U.S. Department of Education prepares to end the pandemic-induced freeze on federal student loan repayments and interest accrual, the agency plans to smooth the process by providing targeted outreach to certain borrowers and offering them flexibility for when repayment restarts.
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That’s according to a new report from the U.S. Government Accountability Office that in part reviewed how the Education Department plans to address potential hurdles for borrowers when student loan repayment resumes in May 2022. About half of all borrowers are estimated to be at increased risk for becoming delinquent, the GAO report said.
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The report found 42.3 million borrowers are covered by the student loan repayment freeze, which began in March 2020 because of the coronavirus pandemic. About 26.6 million loans will be reentering repayment in May, 7.2 million are in default and 9 million won’t require payments yet because their borrowers enrolled in classes or are in a grace period.
Dive Insight:
By the time federal student loan repayments resume in May, payments and interest accrual will have been suspended for more than two years. Ed Department officials expect that long period of inactivity will make it difficult to motivate borrowers to make payments again.
That’s partly why the Ed Department is communicating directly with borrowers about resuming payments — a change from traditionally relying on loan servicers to contact them. Officials are planning to communicate with borrowers each month through several outreach methods, including emails, public messages on the department’s website, social media and text messages.
As of December, Ed Department officials estimated they had current email addresses for 87% of borrowers whose payments were suspended. They plan to reach the remaining borrowers by having loan servicers mail them and providing important information online.
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