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January 15, 20243.5 Million Borrowers Will Receive Student Loan Forgiveness Credit For Nonpayment As Servicing Troubles Persist
FILE – Education Secretary Miguel Cardona speaks with students during a visit to Towson University, Nov. 2, 2023, in Towson, Md. The Biden administration last week announced more penalties and student loan relief to borrowers in the wake of ongoing servicing problems. (AP Photo/Julia Nikhinson, File)COPYRIGHT 2023 THE ASSOCIATED PRESS. ALL RIGHTS RESERVED.
Millions of borrowers will receive student loan forgiveness credit for administrative forbearance periods, according to the Biden administration, as broad loan servicing problems continue.
Forbearances allow borrowers to avoid repayment while staying in good standing on their student loans. They being implemented by the Education Department due to ongoing, widespread loan servicing issues following the return to repayment last fall. The department also announced new financial penalties imposed on loan servicers due to billing mistakes and other problems.
“When unacceptable errors are uncovered, servicers should expect to be held accountable and borrowers should count on this administration to hold them harmless,” said Secretary of Education Miguel Cardona in a statement on Friday.
Here’s the latest.
Student Loan Forgiveness And Repayment Progress Jeopardized By Servicing Problems
Borrowers have been experiencing widespread student loan servicing problems since the Covid-19-related forbearance ended last fall. The so-called student loan pause had suspended payments and interest on most federal student loans since March 2020. The abrupt return to repayment starting in September has not been going well, as many advocates had warned would be the case.
According to a recent bulletin by the Consumer Financial Protection Bureau, a federal agency that oversees the financial services sector, problems have included untimely or late billing statements, miscalculated payments (particularly under income-driven repayment plans like the new SAVE program), long processing times for IDR applications, and overwhelmed call centers resulting in long hold times and dropped calls when borrowers try to reach their loan servicers.
“The resumption of student loan payments means that borrowers are making billions of dollars of payments each month,” said CFPB Director Rohit Chopra in a statement on Friday. “If student loan companies are cutting corners or sidestepping the law, this can pose serious risks to individuals and the economy.”