Federal Student Loan Payments To Restart On February 1 Despite 3 Loan Servicers Shutting Down
For scores of people with student loan debt the end of the COVID-related deferrments is coming after the New Year.
Student loan payments are expected to resume on Feb. 1 after a freeze, despite another loan company shutting down and transferring borrowers to new companies, according to Business Insider.
"We will continue to work to ensure that all of our borrowers can experience a successful return to repayment," an Education Department spokesperson told Insider, adding that the timeline to resume payments would not change even though millions of borrowers are affected by the companies quitting the loan servicing business.
About 44 million people owe a total of $1.7 trillion in student debt--with Blacks carrying a disproportionate load of that debt burden, according to USA Today. Black borrowers owe nearly twice as much student debt as white Americans and earn less to pay off their loans.
The Biden administration announced in August that Feb. 1 would be the “final extension” of the freeze on loan payments, interest accruals and collections of defaulted federal student loans. The freeze started at the beginning of the pandemic and was extended several times.
For millions of borrowers, the pause was a financial lifeline in financially difficult times.
Many hoped for another extension after three companies exited the federal student loan servicing business. The Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources said in July that they would stop servicing federal contracts. Navient made the same announcement in September.
There’s concern among some lawmakers and borrowers that the transition to new servicers may not go smoothly, Insider said. A combined 16 million borrowers are affected by the transitions.
The president promised to cancel $10,000 in student debt per borrower when he campaigned for office. Biden also said he would extend student loan forgiveness to include private Historically Black Colleges and Universities (HBCU) or Minority-Serving Institutions (MSI).
So far, his administration has wiped away nearly $10 billion in student loan debt that benefited permanently disabled people, those defrauded by failed for-profit schools and soldiers deployed to war zones, according to The New York Times. He has, to this point, fended off blanket debt cancelation that progressives have demanded.