IDR Processing, Collection Resumes, Other Student Loan News

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The Ministry of Education (ED) resumed processing applications for revenue-driven repayment plans in early May. Almost a week later, on May 15th, ED released its first report on the status of these applications. This report is part of an agreement received in a lawsuit filed by the American Federation of Teachers (AFT) and is intended to hold EDs liable for processing their application.

The department had a busy month. Also, after a five-year suspension, I sent collection notices to the first cohort of default federal student loan borrowers as wage decorations, tax withholding and Social Security seizing resumes.

Ministry of Education is doing slow processes with IDR applications

In response to the Court of Appeals’ ruling in February, ED removed the IDR application from the website before restoring them without a retention plan option. The borrowers were able to apply for the IDR plan again, but the department said IT and federal loan servicers would not resume processing those applications completely until May.

Until May 15th, ED was providing the latest information on IDR and the Repurchase Program application.

Of the three promised status reports promised late Thursday, May 15th, only around 80,000 IDR applications were approved during April, while around 2 million IDR applications are still pending. Borrowers should expect delays as departmental staff work on the backlog of applications, but in May they will need to accelerate their pace to ensure full processing fulfills their resume.

Any advancements are good news for borrowers who need to take part in an IDR plan to qualify for monthly payments and PSLF.

By numbers

What does this mean for borrowers?

The May 15th update is a warning that processing takes time. If you have already applied, you are one of around 2 million borrowers. Expect delays and beware of communication.

If you’re signed up for a soon-to-be-end Save Plan and haven’t applied for a new IDR, consider applying now and lining up. If you are in any of these situations, your application may make sense:

• You are registered with Save and you will need to switch plans.
• Not in the most affordable IDR plans available.
• I struggle to pay with standard or graduated repayment plans.
• To qualify for PSLF, you must be in the IDR.
• Loan forgiveness is required at the end of the IDR repayment period and is not registered with the IBR plan (forgiveness processing for all other IDR plans is currently suspended).
• The types of student loans that you qualify for this program.

Those who are already registered with an IDR that needs to re-certify their income should have extended their re-certification deadline when the ED suspends IDR processing. Please contact your services to learn the deadline for your new re-certification.

Ed clarifies the public service loan exemption repurchase eligibility

Part 2 of the report made clear what types of public service loan forgiveness repurchase programs qualify. The buyback program is for borrowers registered with PSLFs who have a 120-month qualifying employment, but that forgiveness may be suspended due to tolerance. The program allows you to “buy back” certain months of tolerance and turn it into a qualifying payment.

The borrower sought clarification as information on dustentaid.gov appeared to contradict the message of the ed deputy under the declaration that it qualifies for the buyback program, based on Secretary James Bergeron’s April 15 declaration of hope. A more general copy of StudentAid.gov means any kind of tolerance qualification, but Bergeron writes that borrowers can use the program to “count the period of administration and processing of tolerance towards forgiveness.”

The report clarifies that the Teacher Loan Forgiveness Program is the only type of tolerance that is not eligible. This is tolerant for teachers working towards the tolerance of teacher loans, a loan forgiveness program that requires five years of qualification education services and offers a loan forgiveness program that offers a loan exemption of up to $17,500. However, the time between applying for the program and receiving a response is subject to a repurchase unless it exceeds 60 days.

The status report also states that CARES Act tolerance is “not eligible for repurchasing as it automatically counts as it is PSLF eligibility.”

What does this mean for borrowers?

This part of the report will help you better understand whether borrowers are eligible for a buyback program and help you build a repayment strategy. If scarcity qualifies for a buyback program, it may be advantageous to apply as it will help you reach loan forgiveness earlier. If you apply, please note that you will have to continue making scheduled payments until the ED reviews the application and approves the buyback.

The first round of default student loan borrowers receive collection notifications

The unwilling collection for default federal student loan borrowers began on May 5th. As a first step, according to a press release posted by the ED, we sent 195,000 borrowers a 30-day notification that starts in early June. Wage decoration is the process of withholding money from your salary to meet your debt. The government can also withhold money from tax returns and Social Security benefits. This can be particularly concerning for senior student loan borrowers. The ED also told academic institutions to reach out to former students and remind them of their obligation to pay off student loans.

According to the ED, “Later this summer, 5.3 million default borrowers will receive notifications from the Treasury that their income will be covered by administrative wages.”

What does this mean for borrowers?

The ED will prompt borrowers who are currently defaulted (meaning they have not made payments for 270 days) to contact the default resolution group to resolve the default loan. That might mean:

• Make a payment
• Sign up for IDR Plan
• Sign up for loan rehabilitation

According to the ED, “(Federal Student Aid) will enhance customer service capabilities and extend call centre time, allowing borrowers to access the information and support they need.”

Those with default or default risk should contact the servicer to see which options are available and how the servicer can help. It may be wise to contact a student loan counselor or attorney for additional guidance.