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It’s Time to Get Your Student Loans in Order

Janus Henderson

Contributor:
Janus Henderson
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By:

CRPS®, Retirement Director

With the moratorium on federal student loan payments set to end in early 2022, borrowers should start preparing now to resume their repayments – particularly as other factors may complicate matters. Retirement Director Ben Rizzuto outlines steps to take to help reduce the risk of default or delinquency.

For all of our readers who have student loans, you have likely heard the news that the moratorium on federal student loan payments has been extended to January 31, 2022. However, the Department of Education has said that this will be the “final extension” of the pause, which was instituted in March 2020.

The extra time will help many people get back on their feet financially and will also provide the Department of Education time to transition borrowers back into repayment mode and reduce the risk of default or delinquency.

The issue for 10 million borrowers is that two major student loan servicers announced recently that they will no longer service federal student loans. They include Granite State Management and Resources and FedLoan Servicing, which is the servicing arm of the Pennsylvania Higher Education Assistance Authority. And while you may not be familiar with them, these two servicers account for at least 10 million student loan borrower accounts – around 25% of the Department of Education’s entire portfolio!1

So while having the extra time to not worry about making a payment on your federal student loans will be nice, there could be significant disruptions based on these exits, as well as the task of getting the system back up and running again.

Fortunately, there are steps student loan borrowers can take in the near term to make sure things go as smoothly as possible.

First and foremost, you’ll want to find out if your student loans have been affected. You can do this by reaching out to your current loan servicer to inquire about its status with the Department of Education. If you’re unsure who your student loan servicer is, you can always log onto your Federal Student Aid (FSA) account and view your student loan servicer on the FSA Account Dashboard. Alternatively, you can call Federal Student Aid at 1-800-4-FED-AID (1-800-433-3243).

Even if there is no change, you will want to ask what the recommended course of action is for borrowers as we get closer to January 31, 2022. This might include ensuring the correct bank account is attached to your loan so that payments can be debited appropriately and in a timely manner. Once you’ve done that, you should make sure your loans are set up on autopay.

If, however, your loan is serviced by one of the companies mentioned above, you may have a longer list of things to do. First, you’ll want to see what company will take over servicing your loan. You’ll probably receive some sort of communication from that company in the mail and/or email at some point, but it’s always better to know sooner rather than later. Once you know who your new loan servicer will be, make sure to log on to the servicer’s website and enter your up-to-date contact and banking information.

Along with that, you’ll want to:

Print or Download All Student Loan Payment Records

This is important as one of the main issues borrowers have encountered in the past is a lack of consistent recordkeeping when it comes to the federal aid system.

While this is important for all borrowers, those who are in specific programs like Public Service Loan Forgiveness (PSLF) or an income-driven repayment plan – where time spent repaying student loans while enrolled is critical to obtaining eventual loan forgiveness – will need to pay particular attention to this step.

Download and retain these records now, and consistently moving forward, and put them in a safe place in case you need them in the future.

Save Copies of All Student Loan Correspondence

Along with your payment history, you should keep copies of any correspondence you’ve received from your loan servicer or the Department of Education in the past. Again, for those in long-term payment programs like PSLF or income-driven plans, this will be essential. Remember, those plans can last from 10 to 25 years, so you’ll want to make sure these documents are housed in a safe place that can be easily accessed should your enrollment in the program ever be called into question.

Monitor Payments and Auto-Debits

With any transition such as this, and as we mentioned earlier, you should make sure payments are being made or are automatically being debited. In a 2015 report, the Consumer Financial Protection Bureau found that “when servicers change, payments may be lost, consumers may incur surprise late fees, and processing problems and missing account records can knock borrowers off track on repaying their loans.”2 So be sure to check your bank account and loan account on a monthly basis to make sure payments are set to be debited on or before their due date, and that they are then being debited from your bank account.

While not everything has returned to normal just yet, student loan payments most likely will in 2022. If your loan payments have been postponed due to the pandemic, now is a good time to get reacquainted with them and make sure everything is in order to ensure there aren’t any delinquency issues or confusion.

1“Student Loan Cancellation Debate Continues Amidst Servicer Disruptions.” Forbes. July 21, 2021.
2Consumer Financial Protection Bureau. “CFPB Concerned About Widespread Servicing Failures Reported by Student Loan Borrowers.” September 29, 2015.

Originally Posted on August 25, 2021 – It’s Time to Get Your Student Loans in Order

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