Student loan holders are reportedly facing several significant hurdles in paying off their student loans after repayments resumed in October.
On Jan. 5, the Consumer Financial Protection Bureau published an issues spotlight on the agency’s oversight of student loan servicing practices in the first months after the resumption of federal student loan repayments in October.
The average call wait time to speak to a live student loan representative reportedly increased to more than 70 minutes in October from 12 minutes in August 2023. According to the CFPB, student loan servicers have not met borrower demand for help with their loans after drastically reducing their staffing during the pandemic.
Borrowers are also allegedly encountering major delays in application processing times for income-driven repayment plans and face inaccurate bill statements and disclosures.
“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premature due dates before the end of the payment pause, inflating monthly payment amounts due to the servicer using outdated poverty guidelines, or using the incorrect income when calculating a borrower’s new income-driven repayment plan payment,” according to the CFPB. “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.”
As of late October, more than 450,000 of the 1.25 million pending income-driven repayment plan applications were pending for more than 30 days with no resolution. Some servicers are allegedly taking five times longer than others to process applications, placing borrowers at risk for making much higher payments than they can afford.
Approximately half of related calls were reportedly abandoned in October, more than doubling the 17 percent rate in August. “This is leaving borrowers unable to fix errors, get answers to questions, or enroll in an affordable repayment plan or cancellation plan,” according to the CFPB.
Repayments resumed after the Supreme Court effectively eliminated President Joe Biden’s $400 billion plan to eliminate or reduce federal student loan debt for millions of Americans. Student loan payments had been suspended since March 2020 when the U.S. Department of Education’s office of Federal Student Aid suspended student loan payments, halted the collection of defaulted loans and reduced interest rates to zero.
“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.”