Student loan interest and repayment has restarted for the first time in three and a half years for millions of Americans with federal student loans. Most borrowers had (or have) their first payment due date in October.
Plus, there's a lot that has changed since federal student loan borrowers were last required to make loan payments. For one thing, the three largest student loan servicers all exited the business during the payment pause, so millions of people have a different servicer than before.
Another change is that the Biden administration recently rolled out a brand-new income-driven repayment plan, known as the SAVE Plan, which should help lower payments for most borrowers. Finally, there's the 12-month "on-ramp" to repayment, which essentially allows borrowers to skip payments between now and September 2024 if they choose to do so, although interest will still accumulate.
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A chaotic rollout isn't too surprising
As mentioned, not only are $1.6 trillion of federal student loans resuming repayment at the same time, but servicers have to enroll borrowers who are new to their platforms, and incorporate the mechanics of the SAVE Plan and on-ramp into borrowers' accounts. So it's not surprising that the process isn't going completely smoothly right away.
The SAVE Plan in particular has been a source of errors, according to reports. Borrowers are reporting payments that are far higher than they should be, and many are confused about how much they're actually supposed to pay.
Among other things, the SAVE Plan includes a higher definition of "discretionary income," and since borrowers are only required to pay a certain percentage of discretionary income, it should lower most borrowers' payments. But there are some provisions -- such as only requiring 5% of discretionary income for undergraduate loan payments -- that won't fully take effect until 2024, which is likely adding to the confusion in the rollout.
There have been other errors as well. Large loan servicer MOHELA made (and quickly corrected) an error by using the 2022 federal poverty guidelines to calculate borrowers' payments. Borrowers in other income-driven plans have seen incorrect payment information, due to incorrect family size or marital status information.
420,000 borrowers have been affected (so far)
According to the Department of Education, 420,000 borrowers have been affected by payment miscalculations. But there are many more SAVE Plan applications remaining to be processed, so it's fair to assume that this figure could get worse before it gets better.
To be fair, the Department of Education is taking action to fix the problem:
- It has told servicers to let borrowers know if their payment amounts aren't correct.
- Borrowers with incorrect payments will be put into administrative forbearance until the correct payment can be calculated.
- If borrowers made any recent payments, they will be offered a refund while the situation is being sorted out.
- Any time put in forbearance will still count toward payment requirements for loan forgiveness programs.
So, if you are affected by a payment miscalculation, the Department of Education and your servicer will ensure that it has little or no effect on you.
What to do if your student loan payment isn't correct
If your required student loan payment is different than what it should be, there's a good chance that the loan servicer and/or Department of Education are aware and are taking the mentioned steps to correct the problem.
Having said that, there's nothing wrong with being proactive and reaching out to your student loan servicer to let them know what you're seeing. If you aren't sure who your loan servicer is, you can look it up on the Federal Student Aid portal.
