The Education Department reported on Thursday that more than 300,000 people received false information about their student loan repayments as the start of debt payments this month.
To lessen the burden on impacted borrowers, the government has instructed servicers to notify them and put them into administrative forbearance until their right payment amount is determined, the Education Department informed CBS MoneyWatch.
Some debtors in the Biden administration’s new income-driven repayment plan, known as the SAVE plan, are being impacted by the problem, including some who ought to owe nothing at all under the new framework, according to the agency. The error exacerbates some of the concerns that borrowers are now dealing with, including poor customer support from their loan servicers as their payments become due for the first time in more than three years, as a result of this month’s payment deadline.
From the servicers and the Department of Education, “we’ve seen a lot of confusion and a lot of huge gaps,” said Braxton Brewington of the Debt Collective, an organization that advocates for those who have student debt. “People are getting billed the wrong amounts, so when they have the problems they aren’t able to reach their servicer.”
The Education Department shared that less than 1% of the 28 million borrowers reentering repayment this month received incorrect information. The agency assured that due to its strict oversight and quick error detection, servicers are being held responsible, and borrowers won’t have payments due until the mistakes are fixed.
Earlier, 19 state attorneys general expressed concern to the Education Department about “serious and widespread loan servicing problems” during this month’s repayment resumption. The Student Borrower Protection Center noted long wait times and dropped calls, making it challenging for borrowers to get answers from their servicers.
Plan for paying off SAVE
According to the Biden administration, almost 5 million people are enrolled in the new SAVE repayment plan. SAVE and other income-driven repayment programs (IDRs) tie a borrower’s monthly payment to a portion of their discretionary income.
Although the 5% rate won’t take effect until the middle of 2024, those who enroll in the SAVE plan will have their monthly contributions lowered from 10% to 5% of their discretionary income.
According to the Biden administration, payments for numerous borrowers who are SAVE participants will be cut in half.
Borrowers also have a “on-ramp” that will safeguard them if they skip a payment, are late, or deliver a partial payment. This is a one-year leniency program that started on October 1, 2023, and ended on September 30, 2024.
Borrowers who skip or are late with their payments won’t be regarded as in default and won’t have their information submitted to credit reporting agencies or collection agencies.
According to a statement released on Thursday, the Education Department “instituted its on-ramp program to [give] borrowers a] smooth transition into repayment where they will not be harmed if they miss a payment.”