Since March 2020 when the COVID-19 pandemic started, tens of millions of people have not needed to make payments on their federal student loans thanks to an interest-free pause that the Department of Education (ED) issued. But after January 31, 2022, that nearly two-year freeze will end. What’s next?
“This is an all-hands-on-deck effort,” said Sarah Sattelmeyer, project director for education, opportunity, and mobility in the higher education initiative at New America, a nonprofit research and advocacy organization. “We’re trying to move tens of millions of people back into repayment. Something like this hasn’t happened before.”
According to experts and advocates, challenges with the restart center on getting word out to borrowers, especially those who were at risk of default or delinquency before the pandemic. Loan servicers will also likely need to staff up to manage the expected deluge of borrower calls come February.
“I see three major challenges here,” said Dr. Jenna Sablan, senior policy analyst at State Higher Education Executive Officers Association (SHEEO), a nonprofit that researches higher education policy. ”The first is psychological on the borrower’s side. They haven’t had to worry about this for about two years by the time this restarts. But they’ve probably had to worry about other things like their health or job changes. So, how do you come to terms mentally and emotionally with restarting a payment hanging over you?”
To Sablan, this ties to the second major challenge: a financial one for borrowers. Student loan payments will need to be worked back into people’s monthly budgets. But some people will likely be in dramatically different financial situations than before March 2020.
This summer, the Pew Charitable Trusts, a nonpartisan think tank, conducted surveys that found about 67% of borrowers said it would be difficult to make a payment on their student loans in the next month. Regan Fitzgerald, the manager of Pew project on student borrower success, said such a high number surprised her given news of the economy picking up compared to the early days of the pandemic.
