As early waves of the Coronavirus pandemic disrupted public health, the federal government’s March 2020 CARES Act provided essential relief for borrowers with federal student loans. But that Act may expire on January 31, 2022. If it does, 45 million borrowers will again have to resume their scheduled payments.
Adding to the confusion, two major loan servicers, FedLoan and Granite State, which serve a combined 10 million borrowers, will not renew their loan-servicing contracts. Dubious repayment scams and schemes are on the rise. Borrowers may understandably feel a kind of whiplash: on the hook again for payments, but unsure of how best to proceed.
Anxiety and stress compound in a climate of ongoing uncertainty. No one can predict what the future will bring, but HR departments and product leads can deliver clarity and hope to employees and borrowers alike by forging a path out of confusion and into financial well-being. Granted, there’s no one-size-fits-all solution, but mapping a way forward protects employees’ peace of mind both within and beyond the workplace.
“Enterprises and financial institutions bold enough to step up to this unprecedented challenge will earn the loyalty and trust of the people they serve,” says Bridget Haile, Head of Borrower Success at Summer. “All student loan borrowers have the right to financial health. Especially now, they need trusted sources of guidance to reach that goal.”
Knowing where to turn for reliable guidance adds real value, especially in the current perfect storm—the pandemic, the loan-servicing closures, and the ongoing questions about resuming loan payments. Borrowers know they will receive clear information and advice to help them understand and fulfill their obligations.
How to answer three big questions borrowers have
Questions about the CARES Act continue to swirl. Employers and financial institutions that deal with questions directly can build lasting trust and confidence. Here are a few that Summer has heard most often:
- “I’m nervous because my Public Student Loan Forgiveness (PSLF) loans were just transferred to FedLoan Servicing. Should I set up my new login with FedLoan, or will my account be transferred again? And should I wait to recertify my income-driven repayment (IDR) plan and employment status until the transition is complete?”
Borrowers should absolutely set up the FedLoan account. Loan payments may well be due before the transition is complete. We’ll know more when the Department of Education releases additional information about the transfer, but to be on the safe side, setting up the FedLoan account makes sense.
It’s also smart to download a copy of their payment history from their previous loan servicer and save any correspondence from FedLoan that indicates the number of qualifying payments that have been made, just in case.
Borrowers should be sure to recertify IDR plans to maintain their enrollment and ensure PSLF eligibility. Submitting the PSLF employer certification form every year assures that qualifying payments are tracked—especially crucial now, when a simple misplaced loan payment could have long-term implications.
- “I keep getting calls from [XXX-XXX-XXXX], claiming to be student loan services. They are saying I qualify to have a large percentage of my loans forgiven. But I can't find any information about this company. What should I do?”
Borrowers should do nothing, for now. Unfortunately, student loan scams are increasingly frequent. It’s best not to share any information unless and until you can confirm the details.
- “I’m confused about the CARES Act and possible changes to federal loan forgiveness—and I’m worried about who will handle my loan once FedLoan is out of the picture. I’ve been teaching at a public college for five years and should be halfway finished with my loan, but I’m scared I will lose it. What can I do to protect myself?”
For public service borrowers on a 10-year trek to loan forgiveness, the threat of a loan servicer change makes the fear of restarting the clock very real. It’s a fear that’s based in reality: With a mind-boggling rejection rate of 99%, a single error can be a headache to correct.
Even though the Department of Education has yet to announce which servicer will replace FedLoan Servicing as the company that handles Public Service Loan Forgiveness, borrowers can do their own due diligence. That will include gathering relevant documentation—payment records and any related correspondence—and turning in an employment certification form, which triggers a count of qualifying payments.
Borrowers should keep an eye on credit reports, both to protect against dubious schemes and assure their repayment history is complete and accurate. Especially as loans shift from one servicer to another, it’s important to avoid unwitting servicer or transfer errors.
How employers can clear the air
The first step? Make sure that employees know they have a reliable, trustworthy source of advice, including access to a knowledge base that supports informed decision-making. Summer offers an array of products designed to help enterprises assess and respond to workforce needs and concerns.
HR leaders can support employees carrying student loans by tapping into Summer’s resources to streamline and lower that debt. Using Summer's resources, borrowers save an average of $31,000.
Offering established employees and prospective new hires the tools to improve their financial lives is positive proof that your organization values each individual’s well-being—a key characteristic of employers of choice.
How financial institutions can chart a path
Simplifying the repayment process is easy with Summer’s suite of API solutions. From financial management systems to neobanks, financial institutions can use Summer’s scalable recommendations to swiftly chart a path to lower monthly payments, no matter which loan servicer is in place.
For example, encouraging enrollment in IDR plans lowers average monthly payments by nearly $200. Helping customers qualify for loan forgiveness wipes out debt and racks up an average savings of $67,000.
Precise, specific recommendations at the right moment can deliver additional benefits to customers who wish to refinance loans in more favorable terms or access high-yield savings accounts, car loans, and home mortgages. Less debt means more cash, plain and simple.
How Summer can help
In this complicated time, Summer is here to help institutions, organizations, and borrowers sort out what’s important amidst the noise.
With Summer’s tools to simplify and save on student debt, organizations and institutions can empower and support student loan borrowers, helping them stay on the road to greater financial freedom.