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Student loan borrowers facing challenges as payments start again

College-student-3500990_640After a pause for more than three years due to the covid-19 emergency, student loan borrowers are resuming payments.

However, they’re things aren’t going smoothly. 

Student loan borrowers are experiencing: (1) long hold times when trying to reach their student loan servicer, (2) significant delays in application processing times for income-driven repayment plans, and (3) receiving inaccurate billing statements and disclosures, according to a report by the Consumer Financial Protection Bureau.

“The resumption of student loan payments means that borrowers are making billions of dollars of payments each month,” said CFPB Director Rohit Chopra. “If student loan companies are cutting corners or sidestepping the law, this can pose serious risks to individuals and the economy.”

The agency has been monitoring student borrowers’ experiences during the return to repayment, using consumer complaints to identify problems.

Key concerns are:

  • Long hold times and abandoned calls: The report finds that borrowers are frequently forced to wait on hold for more than an hour when calling their servicer, and many give up without receiving assistance. Many servicers were able to boost their financial performance by reducing staffing during the pandemic. However, servicers haven’t met the borrowers’ demand for help with their loans. Average call wait times to speak to a live representative have risen from 12 minutes in August 2023 to over 70 minutes in October 2023. As a result, about half of calls were abandoned in October 2023, more than double August 2023’s rate of 17 percent. This is leaving borrowers unable to fix errors, get answers to questions, or enroll in an affordable repayment plan or cancellation plan.
  • Significant delays in processing income-driven repayment plan applications: Millions of income-driven repayment plan applications were submitted between August and October 2023. As of late October, servicers reported more than 1.25 million pending income-driven repayment plan applications – with more than 450,000 of those applications pending for more than 30 days with no resolution. Processing times vary across servicers, with some servicers taking five times longer than others to process applications. These delays put borrowers at risk for making higher payments than they can afford.
  • Inaccurate and untimely billing statements: Borrowers are receiving faulty and confusing bills from servicers. Errors include listing premature due dates before the end of the payment pause, inflating monthly payment amounts due to the servicer using outdated poverty guidelines, or using the incorrect income when calculating a borrower’s new income-driven repayment plan payment. These mistakes can cause significant borrower confusion, and can further strain the servicers’ resources by forcing borrowers to contact their servicer to resolve the errors.

Chopra said the agency is using its supervisory authority to examine loan servicer conduct and performance.

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