6. Falling behind on student loan repayments has a lasting impact on students. Default can wreck their credit and make them ineligible to receive additional student aid. Even worse, students can end up with garnished wages or even have their tax refund withheld. Students who are struggling now will have an even tougher hill to climb as their debt compounds with possible collection fees, increasing interest or being sued for the entire amount at once. 7. The suspension may have created a false sense of security. As you look down the road, diligence needs to be taken to prepare for long-term repayment issues. • The 2019 CDR was established on March 20, 2020 when the office of Federal Student Aid began providing the following temporary relief on ED-owned federal student loans: suspension of loan payments, stopped collections on defaulted loans, and a 0% interest rate. All loans were brought current and a school’s 2019 CDR was established. • The 2020, 2021 and 2022 CDR was impacted in March 2020 when the CARES Act went into effect and all borrowers were brought current. When loans resume repayment in October 2023, they cannot default within the cohort year, thus the 2020, 2021, and 2022 CDRs will be zero. • For 2023, the “on-ramp” transition period means no delinquencies will be recorded until October 1, 2024. Only students who enter repayment between October 1-5, 2024 and never make a payment could default and impact the school’s CDR.
• In 2024, two-thirds of the cohort year remains that will determine the CDR.
• 2025 will be the first cohort year not impacted by the cares since 2018.
While suspending student loans was a relief to many students and schools alike, returning to repayment in a much different atmosphere than when it was suspended serves many challenges in understanding the impact and how to return to successful repayment habits. Taking these challenges into account now and planning for what’s ahead will help you manage the impact to protect your students and your school. Additional Servicer Challenges You might be thinking, what’s the rush? It will be busy, but probably a lot of the same questions. BUT servicers aren’t going to be easy to get ahold of or even find adding another layer of complexity and set of questions that could lead to very negative actions. • Prior to Covid millions of borrowers were with FedLoan Servicing, which also handled the Public Service Loan Forgiveness program. Recently, Fed Loan Servicing completed its withdrawal from the federal student loan servicing system and MOHELA has now taken over the program. This could be a shock to those that have not paid attention and will try to get ahold of Fed Loan servicing when payments restart.
• Also prior to Covid, millions of borrowers were with Navient who also recently withdrew from the Education Department’s student loan servicing system. Those accounts are now with Aidvantage.
• Great Lakes Higher Education is currently in the process of transitioning many accounts to Nelnet another major department loan servicer.
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