It’s only appropriate that the last Friday the 13th of 2023 fell in October, the spookiest month of the year. Those of us who grew up watching 80’s horror flicks know how significant that is. But this October brings fright to a (mostly) younger generation trying to navigate the return to repayment labyrinth. Whether it’s payment notices, complicated enrollments, servicer errors, or unscrupulous players trying to take advantage of it all, this is scarier than most haunted mansions! But fear not; we’ve got your back.
Latest on the Loan Repayment Debacle
If you’ve recently waited on hold with Mohela for a few hours, only to be greeted by an unhelpful servicer representative on the other end, you probably thought you were in a nightmare. This situation just gets worse and worse, and it’s finally getting some major publicity. The New York Times recently ran a story claiming over 400k borrowers were impacted by incorrect payments. However, their explanations missed the mark. This issue goes way beyond poverty levels and family size mishaps. Borrowers are enrolled in the wrong payment plans, and in many cases, they are seeing payment amounts of a few thousand dollars instead of the Income-Driven Repayment (IDR) plans which should show a few hundred.
There is some good news: Mohela and other servicers recently began sending out administrative forbearance notices. It appears they are giving most borrowers a two-month break from payments while they sort out the issue. Now, I know many of you are pursuing Public Service Loan Forgiveness (PSLF), and you’re concerned these months will not count towards PSLF. You’ll be happy to know under the new PSLF rules an administrative forbearance does count toward PSLF. The only downside to this brief pause is that interest will accrue. Those who are supposed to be in the SAVE plan benefiting from 100% interest subsidy may find a decent amount of interest tacked onto their account. If you end up pursuing PSLF then the forgiveness event will negate this. But for those using SAVE for short-term relief, or specifically for the subsidy, you may want to call your servicer and fight to get that removed. I recommend you wait for things to calm down a bit and fight this battle in December or January.
We reported in our last newsletter that the panel for Negotiated Rulemaking (Reg Neg) had been selected. While things are moving quickly with the onset of this process (the first hearing was held last week, and two more are scheduled for November and December), it’s no surprise that the unofficial notes from the first session indicated members have a wide range of viewpoints and they are nowhere close to an agreement on anything. We have two takeaways thus far.
First, while the Biden administration has not released any details for what they want round two of loan cancellation to look like, they did instruct panelists to focus on five specific demographics to consider borrower relief:
- Those whose debt balances have grown higher than their original loans.
- Those who have been in repayment for decades.
- Those whose institutions provided low financial value.
- Those who took out loans so long ago that the same federal benefits didn’t exist as do now.
- Those who have extreme financial hardships.
In other words, this is not a blanket loan cancellation simply based on income as before. Therefore, if you do not fall into one of the categories above, you may not want to hold your breath on this one.
Second, the rulemaking sessions in November and December push us well past the procedural deadline of November 1st to introduce new program rules for implementation the following July. While the Department of Education may have some sort of procedural trick to get around this standard, it’s no treat. The presumption we must make for now is that this new debt relief will not come next year. Yikes! This is worse than a rotten pumpkin on your porch.
Beware of Document Preparation Companies and Other Scammers
It’s no secret that student loan scam companies are abundant. They have been around for decades and can be quite aggressive. But with the numerous procedural changes and return to payment confusion, the volume is really picking up. And some are getting quite crafty. Enter document preparation companies. Outside of the student loan world, there are legitimate document preparation companies which provide useful services to businesses. Within the student loan world, however, borrower beware!! We’ve seen recent examples of mail notices designed to look exactly like the letters you receive from the FSA office. There’s a specific one which features a dual header stating “Final Notice,” and it promotes the legitimate “IDR One-Time Account Adjustment”. It has a bar code, a QR code, and some correct language detailing the program. Heck, it even tells you how to go to studentaid.gov and create your FSA ID!
Their strategy relies on you calling their customer service number for assistance. Some of these companies simply try to convince you to pay them a fee to do paperwork. Others are more ruthless and ask for your FSA ID and password under the guise of assistance. But once they have that information, they hijack your account, change your password, switch your email address, and cause all sorts of headaches.
As a rule, Student Loan Professor gives advice. We don’t do applications for you, and we never promise forgiveness. We help guide our clients through applications and student loan websites, but only while you’re directly logged in and sharing your screen – not the other way around. We know this return to payment has been a nightmare for some of you, and these notices or services may be tempting or confusing, but don’t fall for it. When in doubt, contact your SLP advisor (if you’re a client), or contact your servicer directly (not using the number on the letter) to verify any communications or actions that might be needed.
Contract Negotiation and Financial Planning
Let’s end this with something less scary. This last item is for our physician readers, and others who enter into complex employment contracts. If you’ve been following us for any length of time, you know we partner with a fantastic advisory firm called Larson Financial Group for those who want more comprehensive and holistic financial planning. Well, those services are even better because Larson has now joined forces with Physicians Thrive.
While also offering a broad range of financial services, Physicians Thrive is best known for their prowess with contract review and negotiation. Providers are often shocked to learn (after-the-fact) what they could have negotiated on their employment contract, but were told those things were non-negotiable. Worse yet, many new providers assume they have no negotiating power because they have no experience, so they simply take what that employer offers. Do not make this mistake! You have the latest training on the latest procedures, treatments and technology. You’re worth more than you know! Check out their recent article, and contact our friends at Physicians Thrive to see how they might be able to help. BTW, you don’t have to be a physician to work with them. If you find the article relevent to your employment, give them a call!
We’ll wrap it up from here and let you get back to picking out your Halloween costume and favorite candy. As always, we’re just a click away to help with any of your student loan needs.
Til debt do us part!
Brandon Barfield is the President and Co-Founder of Student Loan Professor, and is nationally known as student loan expert for graduate health professions. Since 2011, Brandon has given hundreds of loan repayment presentations for schools, hospitals, and medical conferences across the country. With his diverse background in financial aid, financial planning and student loan advisory, Brandon has a broad understanding of the intricacies surrounding student loans, loan repayment strategies, and how they should be considered when graduates make other financial decisions.