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Student loan companies will scramble to adapt and some borrowers could default if Biden extends payment pause with ‘grossly insufficient notice’, services group says

Even if President Joe Biden extends the student loan payment pause, companies that service those loans say they may not be able to account for the change in a timely manner.

In April, Biden extended the federal pause on student loan payments for the fourth time, through August 31. He is should announce an extension of that break with a broad student loan forgiveness on Wednesday. Both of these announcements come just a week before payments are expected to resume, and with loan officers receiving very little guidance so far, they advised the department that any announcement is unlikely to be implemented as smoothly as it could. hope so.

Scott Buchanan, the executive director of the Student Loan Servicing Alliance, a group that represents federal loan officers, wrote a letter Monday to Education Secretary Miguel Cardona, advising him “that any announcement at this late date , less than ten days before the scheduled resumption of September 1, risk of operational disruptions.

“We are now ten days away from the expected recovery for 35 million borrowers, and – as managers have warned for weeks this would be the case – it may not be possible to guarantee that a delay full and complete recovery can be systemically effected by September 1 for each borrower without incident,” Buchanan wrote. “Ten days is grossly insufficient notice to reprogram the massive, intertwined systems that handle ready, provide appropriate system testing time, and also build and implement revised communication plans.”

He added that if payments resume on September 1, “millions of borrowers will be confused, some caught massively unawares, some could be unnecessarily delinquent and it could take months to resolve these issues.”

In July, the education department educated lending companies to stop messages to borrowers regarding repayment. But as Buchanan mentioned, there have already been communication issues given that September 1 is still the scheduled reboot date. For example, Insider obtained evidence Tuesday that Aidvantage, operated by student loan company Maximus, mistakenly informed some borrowers that they had payments due in September.

A Maximus spokesperson told Insider that apologies were sent to affected borrowers, but Insider heard from borrowers who said they never received an apology and their accounts still reflected payments due. That’s why Democratic lawmakers have pushed for debt cancellation alongside an extended payment pause to ensure the department and loan companies have enough time to implement the relief before the due date of another monthly invoice.

The department has yet to comment on issues that could arise with a late relief announcement, and Buchanan said that while duty officers will do their best to “quickly and efficiently” make changes, “there may be have service issues that impact borrowers and may require hardware repair.”

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