WASHINGTON — After President Joe Biden’s decision last month to cancel some student loan debt, consumer advocates and loan servicers have raised concerns that the program’s rollout could be messy and lead to confusion for borrowers.
Student debt relief advocates and loan servicers say the Biden administration is trying to do too much in too little time and lack the systems and processes to ensure the process runs smoothly.
Most borrowers who qualify for cancellation (people who took out less than $125,000 in the 2020 or 2021 tax year) will need to fill out an application with the Department of Education once it becomes available in early October.
But that doesn’t leave much time between when applications open and the Dec. 31 deadline to resume federal student loan payments for the first time in nearly three years. Consumer advocacy groups and loan servicers say the three-month period is not nearly long enough for the roughly 40 million eligible borrowers to apply and for the Department of Education to approve it and adjust loan balances.
“Posting applications in October doesn’t give people much time, especially if the application crashes the way StudentAid.gov crashed after the cancellation announcement,” said Kyra Taylor, an attorney at the National Consumer Law Center, referring to when a The Department of Education’s website crashed after a flood of borrowers rushed to find more information following the president’s August 24 announcement.
“You want people to have an accurate view of what they owe before you force them to start paying back,” he said.
Supporters say the White House should have prepared the application website earlier so it would be available to borrowers once Biden announced the cancellation. They also questioned why the administration did not allow more time before payments resumed. The Department of Education did not respond to requests for comment from NBC News.
Biden said that resuming the payments alongside the loan cancellation would ensure that the debt relief would not contribute to inflation. In its announcement last week, it made clear it would not extend the payment freeze beyond December 31.
When asked to respond to concerns about the tight timeline, White House press secretary Karine Jean-Pierre said the Biden administration has already canceled billions of dollars in debt for students who attended predatory for-profit institutions and that the Education Department could work out upcoming apps smoothly.
“It’s not the first time. We’ve done this before,” he said. “There is a precedent here.”
Jean-Pierre declined to give a specific date for when the application will be available in October, but advised borrowers to apply by Nov. 15 in order to adjust their loans before monthly payments resume. “There’s a deadline there,” he said.
Consumer advocates said not enough was done to ensure borrowers had all the information they needed.
“I have never seen so much change happen in our student loan system in four months. It’s unprecedented,” said Bryce McKibben, senior director of policy and advocacy at the Hope Center for College, Community and Justice at Temple University. “We really need a massive public service announcement campaign to get this right. We need something along the lines of what we did to help people enroll under the Affordable Care Act.”
Some details about the president’s student loan program — such as proposed changes to the income-based repayment plan that would cut monthly payments for undergraduate loans in half — have not yet been released. Even when the official proposal is announced, those changes will have to go through a lengthy regulatory process, meaning they likely won’t be implemented until January, adding to the confusion for borrowers as they try to figure out how much they’ll owe this month.
And it’s still unclear what will happen to the roughly 20 million borrowers the White House estimates will have their loans wiped out entirely by debt relief if their applications aren’t approved by January, when payments resume.
Loan servicers, private companies contracted by the government to administer federal loans, have already been inundated with calls from worried borrowers facing long wait times, only to be told their questions still haven’t been answered.
Many of the loan servicers cut staff during the pandemic when monthly payments stopped and are now scrambling to respond to inquiries from borrowers about the new loan forgiveness program as they prepare to resume collecting payments from millions of borrowers with significant delinquencies. less staff than they had before covid.
“We’re trying to build five different airplanes as they come down the runway at the same time, and we only have the same number of technicians as we had last week, and that’s going to make the process time longer for a lot of these projects than it might normally be.” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, which represents companies that collect student loan payments for the federal government. Buchanan said the Biden administration did not consult his team about its plans.
Amidst the complexity and stress for borrowers is the opportunity for fraud to flourish, something borrower assistance groups have seen with past student loan programs and are already starting to see with loan cancellation. Scams offer to help borrowers with the application process for a fee or to help borrowers reduce their payments faster, but they don’t actually provide any help. Instead, they take the borrower’s money and sell their personal information.
“I think the Wild West of crooks is going to be a really big problem,” McKibben said. “This creates a space in which these scams can thrive, where they can take advantage of the confusion of this period.”
This article was originally published on NBCNews.com