After a three-year hiatus, student loan payments resume this weekend, with the Biden administration aiming to aid borrowers through a fresh income-driven repayment plan and an on-ramp repayment initiative.
Approximately 44 million Americans face the resumption of student loan repayments after a 3.5-year pause, potentially straining household finances, The Hill reported.
The loan relief started in March 2020 during the COVID-19 pandemic to aid financial stability, but Congress recently blocked further extensions.
The White House was recently questioned whether it had contemplated postponing the resumption of payments due to the impending government shutdown.
Although press secretary Karine Jean-Pierre emphasized the importance of addressing student loans as a “top priority,” she did not suggest postponing the loan payment restart in light of the potential government shutdown, reported The Hill.
“So, you know, if this happens, if Republicans in Congress, you know, go down this road of shutting down the government, we anticipate that key activities at Federal Student Aid will continue for a couple of weeks,” Jean-Pierre said.
“However, she continued, if a prolonged shutdown lasts more than a few weeks, it could substantially disrupt the return to repayment effort and long-term servicing support for borrowers.”
A government shutdown could also exacerbate the challenges faced by student loan servicers, who are already grappling with the simultaneous reactivation of over 45 million accounts following a lull that commenced during the early stages of the COVID-19 pandemic.
The looming shutdown coincides with student loan servicers’ unsuccessful bid for a budget increase from Congress. The Department of Education had previously indicated that the allocated funding would fall short of ensuring a seamless transition.
“As the Department has repeatedly made clear, restarting repayment requires significant resources to avoid unnecessary harm to borrowers, such as cuts to servicing,” a spokesperson said.
Critics contend that the Department could have allocated funds more effectively to assist loan servicers in their preparations. These budget reductions particularly impact customer service, potentially leading to extended wait times for borrowers seeking assistance when payments resume.
“Definitely be proactive and make sure you are … ready to make those payments,” advised Michael Kitchen, higher education and student loan repayment expert at LendingTree. “There have been a lot of changes over that period — maybe you’ve moved, and your servicer has changed — so just get in front of it if you can.”