Student loan borrowers face "Nightmares" service as repayments resume

The student loan repayment date is here and will resume after a 3-year break

The student loan repayment date is here and will resume after a 3-year break


As student loan repayment requirements resume this month, some borrowers are experiencing customer service issues with their loan providers. The resulting chaos has led 19 state attorneys general to argue that consumers facing service problems should not have to pay back their debts until the problems are resolved.

In a Friday letter to the Ministry of Education, 19 state attorneys write wrote that they were alarmed by “serious and widespread loan servicing problems” with the resumption of repayments this month. An advocacy group, the Student Borrower Protection Center, said some borrowers are experiencing a “nightmare situation” with long wait times and dropped calls, making it difficult to get answers to questions about their loans.

The problems arise as student loan repayments start again in October after a break of more than three years. During the pandemic, some loan providers chose to get out of business, which means that some borrowers are dealing with new service providers. Borrowers report problems such as wait times as long as 400 minutes and customer service agents unable to provide accurate information, the AGs wrote in their letter.

“The borrowers who contact us are having trouble getting through to customer service representatives to find out their repayment options,” Persis Yu, the deputy director of the Student Loan Protection Center, told CBS MoneyWatch. “Many wait several hours on hold, and many never reach a real person at all. Those who do get through are confused and often misinformed.”

New loan originators “have little or no experience with such volumes and do not appear to be adequately staffed to respond to them,” the AGs wrote in their letter.

The Department of Education did not immediately respond to a request for comment.

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Interest-free indulgence?

Because of the problems borrowers face, people affected by servicing problems should have their debt placed in “non-interest-bearing administrative surplus”, meaning their loans will not accrue interest until the problems are resolved, says the lawyers wrote general.

The attorneys general who signed the letter are from Arizona, California, Connecticut, Colorado, Delaware, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, Oregon, Pennsylvania, Vermont, Washington and Wisconsin, as well as Washington, DC

“Even our offices and state student loan ombudsmen are having trouble getting timely responses from some servicers through government escalation channels,” the AGs wrote. “And when borrowers do reach out to servicers, many report unsatisfactory interactions, including representatives being unable to explain how payments were calculated, unable to resolve issues or providing inconsistent information.”

The pause in student loan payments began in March 2020 as part of a series of pandemic-related financial relief measures. The break was extended several times after that, but the congress earlier this year blocked further extensions.

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