Are you a student loan borrower feeling overwhelmed and frustrated by the challenges of dealing with loan servicers? You’re not alone.  Many borrowers need help when navigating the repayment process, which can often be confusing and complex.  PayForED will explore the top five challenges that student loan borrowers commonly encounter with loan servicers and the repayment restart.

From difficulties accessing accurate and up-to-date information about their loan balances and repayment options to experiencing delays in processing requests, borrowers often need help to achieve transparency and efficiency in their loan repayment management.  Additionally, misconceptions and lack of clarity surrounding eligibility criteria for loan forgiveness and income-driven repayment plans add to the frustrations for the borrower.

Understanding these challenges is essential to empower borrowers with the knowledge and tools to navigate the repayment process better and effectively manage their student loans.  By addressing these obstacles head-on, borrowers can work towards a more manageable and stress-free loan repayment journey.

As described below, we detail each of these challenges, providing valuable insights, tips, and resources to help you overcome them effectively.

Common challenges faced by student loan borrowers

Student loan borrowers often experience a variety of challenges when managing their loans.  These include difficulties obtaining accurate information about their loan balances, comprehensive repayment option advice, long wait times to access customer service, and limited advice related to IDR methods and taxes.

These loan difficulties are not all the loan servicers’ fault.  Due to the COVID National Forbearance, they needed to manage a business with nine starts and stops.  Also, two major loan servicers left the business during this time.  They are trying to operate in unprecedented times and handle this situation.

One of the critical challenges that borrowers face is understanding the repayment restart.  Depending on your situation and changes that happened before, during, and now due to COVID, this will be different for each borrower.

Your payment will be the same if you are a borrower enrolled in a payment plan when the National Forbearance started.  For IDR borrowers, this can be a benefit and a problem.  An IDR payment method is based on your income; for some, the numbers reflect your salary and marital status from 2019 or 2020.  Many could see significant increases in their payment due to this non-payment and update period.

At the same time, nearly four graduating classes, or almost 13 million borrowers, became enrolled in a repayment plan.  These borrowers may have been surprised at the initial payment expected since the default is the 10-year Standard method.  The 10-year Standard monthly payment is the highest amount.  The new borrowers must investigate their best repayment options based on their situation.

Borrowers need to realize that we are returning to regular times.  No matter what payment plan or decision a borrower chooses, interest started being charged on September 1, 2023.

Understanding the repayment restart from the Loan Servicers Prospective

Many borrowers may face difficulty getting the correct answer or waiting a long time for service; some problems are not the fault of the loan servicers.  They implement the rules the government and the Department of Education create.  Here is a list of a few hurdles the loan servicers face with the restart that may affect your service level.

• The current system is built to handle 325,000 calls per month.  Approximately 30 million will be restarting repayment.
• New rules and programs required recent changes and training for loan servicers staff.
• Over 18 million borrowers were reassigned to new loan servicers.
• Budget cuts reduced staff and hours of operations.
• Staffing turnover and layoffs during COVID resulted in many newly trained employees.

If you are still determining who your loan servicer is, the best place to start is the Department of Ed website, StudentAid.gov.  On this site, you can check your loan balance and the loan servicers that your loans are assigned to.  To get access, you will need your FSA ID and password.

If you pursue Public Service Loan Forgiveness (PSLF), your loan servicers should be MOHELA.  If it is not, contact MOHELA to get the loan transferred to them.

Listed below are the websites, phone numbers, and hours of operation for the loan servicers.

Challenge 1: Inaccurate or incomplete loan information

One of the most significant challenges borrowers face is accessing accurate and up-to-date information about their loan balances, repayment options, and eligibility for loan forgiveness or discharge programs.  This challenge can make it difficult to make informed decisions about your loan management.  It can lead to missed payments, default, and other negative consequences.

Loan servicers are responsible for providing borrowers accurate and timely information about their loans.  However, many borrowers report difficulty accessing this information, including incorrect or incomplete information.  Many borrowers depend on the loan servicer’s website for their information.

Due to the number of borrowers who had their accounts transferred, we recommend you validate your information on the Student Aid.gov site.  This site is the central data site for all the student loan servicers to report your information.  We also recommend that if your account was transferred, access your old loan servicer account and download that data, specifically the payment history.

Another issue that borrowers face is the increased complexity of student loan repayment.  This repayment process is extremely complex, especially for borrowers using the IDR methods and those pursuing loan forgiveness.  Since the repayment method requires advice on taxes and personal finance, the loan servicers legally cannot provide the complete advice borrowers need.

Challenge 2: Difficulty accessing loan servicers

Another common challenge is that borrowers need help accessing loan servicers.  This challenge can be due to long wait times, confusing phone systems, and the borrower’s schedule.  As a result, borrowers may need help to get the information and support they need to manage their loans effectively due to the limited hours the loan servicers are open now.  There are no weekend hours available due to the budget cuts.

To address this challenge, borrowers should explore alternative methods.  This option would include using the StudentAid.gov site since this site contains many of the services like loan consolidation and changing repayment plans.  The borrower can do this online directly.

That still raises the question about getting the right advice.  PayForEd has financial professionals trained in various loan repayment and forgiveness strategies.  In addition, they can provide complete advice that the loan servicers legally cannot and will allow the borrower to make an informed decision.

Challenge 3: Confusing repayment options and eligibility criteria

Many borrowers need help understanding the repayment options available, including income-driven repayment plans, deferment, and forbearance.  Additionally, eligibility criteria for loan forgiveness and discharge programs can be confusing and difficult to navigate, making it challenging to make informed decisions about loan repayment management.

Starting in 2023, the IRS and Department of Ed have begun a data integration process to make it easier for borrowers to transfer their data.  These only affect borrowers using the various IDR methods and those completing the FAFSA.

The complexity occurs mainly around using the IDR methods and correctly managing the borrower’s income and tax filing decisions.  In addition, any borrower pursuing loan forgiveness must use an IDR method.  To make the correct decision, the borrower must understand the various IDR details, taxes, and personal finance decisions like retirement contributions.

To overcome this challenge, borrowers should take the time to research and understand all available repayment options and eligibility criteria for loan forgiveness programs.  This review may include consulting with a financial advisor or student loan expert to explore options and determine which plan aligns with their financial goals and circumstances.

Borrowers need to be careful with whom they select to get outside advice.  There will be plenty of scams.  Be very careful if you get a phone call, and they ask for your FSA ID and password to get access to your account.  This information will give them access to your personal information like birthdays, social security numbers, and other contact information.

Challenge 4: New borrower’s introduction to the process

New borrowers could feel overwhelmed and frustrated by the need for personalized guidance and support from loan servicers.  The system was not designed to handle this many new borrowers simultaneously.  It can result in a lack of direction and clarity, making navigating the repayment process difficult.

As stated above, over 13 million borrowers have never been in repayment or worked with loan servicers.  You need to understand that the government set your repayment method to the default payment method, the 10-year standard.  This repayment will be the most expensive.

We recommend you investigate your options on the StudentAid.gov site before you call the loan servicers.  You can use the StudentAid.gov site to explore the various repayment options.  This review would allow you to be better prepared once you get to the loan servicer.

If you feel confident and have done the correct research, you can change your repayment method on the StudentAid.gov site or the loan servicers site.  Before changing repayment, ensure you understand your short- and long-term goals.  The lowest payment may not be a better option.

The loan servicers often recommend an IDR method since it is the lowest payment.   The loan servicer’s goal is to keep the borrower current.  This payment does not cover the interest charge so the loan balance will rise.  Make sure you understand all facets of your repayment decisions.

Challenge 5: New complexities limit the loan servicer’s advice

Most borrowers perceive that loan servicers can provide the correct advice.  Due to the increased use of IDR methods, the loan servicers can only legally provide you with some of the information the borrower needs to make the best decision.

The loan servicers cannot give any tax or personal finance advice.  With the IDR methods, the monthly payment is based on the borrower’s Adjusted Gross Income (AGI).  This method requires the borrower to understand how to manage pre-tax benefit decisions and how to file the borrower’s taxes is critical.

Starting in 2023, making the tax filing decision is becoming essential to the repayment process due to the new IRS integration.  This tax filing decision is critical for IDR users.

Conclusion: Importance of staying informed and proactive in managing student loans.

Student loan borrowers and loan servicers are both living in unprecedented times.  It has been three and a half years of non-payment.

Borrowers need to realize that the loan servicers may be unable to provide the correct advice due to the new complexities.  This problem is especially true for borrowers who are using the IDR methods.  Another growing issue is more parents are carrying student debt into retirement, which requires a particular analysis that the loan servicers cannot provide.  In those cases, borrowers will need professional financial advice.

Managing student loans can be a daunting task.  Still, it is essential to stay informed and proactive to overcome the challenges effectively.  By understanding the top five challenges that borrowers commonly face with loan servicers, you have an insight into a few options.  With the repayment restart, borrowers need to be proactive and take steps to address them.  Ultimately, this can lead to greater financial freedom and a brighter future.