“Unprecedented” Government Shutdown: Student Loan Services Brace for Chaos – Will You Be Affected?

As the deadline for a potential government shutdown approaches, the fate of thousands of federal workers hangs in the balance, including their access to student loan repayment assistance. At the same time, concerns are mounting about the readiness of federal student-loan servicers as borrowers prepare to reenter repayment. 

Crafting Plans

Amidst the looming threat of a government shutdown, federal agencies have started crafting contingency plans to navigate limited appropriations. 

The Committee on House Administration has unveiled its plan for Capitol Hill staffers, revealing that no employees will receive pay during the shutdown.

 It is worth noting, however, that the member of Congress will still receive pay despite their role in the government shutdown.

 While healthcare benefits will continue for all staff, some benefits, like the Student Loan Repayment Program for Hill staffers, are at risk.

 This program grants employees up to $833 in repayment benefits per month, but during a shutdown, these benefits may lapse. 

Good Standing Loans

The House Administration Committee says, “Employees participating in the House’s Student Loan Repayment program always retain loan responsibility and should make any payments due, as required, to ensure their loans remain in good standing and continue to be eligible for the program.” 

The Student Loan Repayment Program for Hill staffers states, “The aggregate amount of payments made on behalf of an employee cannot exceed $80,000, and members of the House are not considered eligible for the program.” 

However, members of Congress will continue to receive their salaries during a shutdown, protected by Article I, Section 6 of the Constitution.

Concerns About Student Loan Servicer Preparedness

While the government shutdown poses many challenges, student loan servicers are also grappling with significant concerns. MOHELA, one of the major student loan companies servicing over 7 million borrowers, expressed concern about its readiness to handle the impending wave of borrowers reentering repayment. 

The company manages the Public Service Loan Forgiveness portfolio and anticipates servicing over 7.7 million borrowers by October 1. 

However, MOHELA faces resource constraints and funding issues, hindering its ability to assist borrowers efficiently. 

MOHELA cited rapidly changing demands, such as litigation outcomes and the need for higher-level training for customer service representatives, as factors straining its budget. 

Constant Complaints

The company warned that extensive servicing delays are likely as it faces “an unprecedented surge in activity in the near future, one which is expected to last well into 2024.”

It’s worth noting that many borrowers have already experienced customer service issues with servicers, including long wait times on the phone and inaccurate payment statements. MOHELA alone received over 36,000 complaints from July 2022 to June 2023. 

Nelnet, another federal servicer, expressed uncertainty about its ability to predict the number of borrowers it will service, citing the evolving nature of relief programs and funding uncertainties. 

Lawmakers’ Response and Borrower Impact

These concerns are not unfounded, as responses to previous inquiries revealed that nearly 6 million borrowers had not created accounts with their new services that resulted from transfers during the pandemic. 

Borrowers have reported hours-long wait times when seeking assistance, resulting in thousands of complaints.

Senator Elizabeth Warren and her colleagues have pressed servicers for information on their preparedness for the repayment transition and expressed doubts about their claims based on lack of funding.

In a letter from Warren, she was “skeptical of (servicers) claim that insufficient funding is keeping them from fulfilling their most foundational obligation considering that they were paid on average approximately $2 a month per account amounting to billions of dollars, while payments, interest, and collections were suspended during the public health emergency.”

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The post “Unprecedented” Government Shutdown: Student Loan Services Brace for Chaos – Will You Be Affected? first appeared on The Net Worth Of.

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