The three-year, COVID-era student loan payment pause officially ended in September. The first payments were due in October. Since then, borrowers have faced long hold times to connect to representatives at their federal student loan servicer, payment processing errors, seemingly random repayment status changes, and confusion over their repayment options.
Here’s a brief video capturing what student loan borrowers have been sharing on social media:
Student Loan Debt Has Grown while Personal Financial Health Has Declined
The national student loan debt balance has grown by 13.5% since 2018. The current total balance is nearly $1.7 trillion. This coincides with the growing cost of college, which has increased at an annual rate of 3.8%.
According to the Social Security Administration, the cost of living increased most dramatically between 2021 and 2023, putting student loan borrowers in a financially worse situation. $100 worth of goods in 2020 now costs $119.27 in 2023.
Moreover, according to the Bureau of Labor Statistics, wages haven’t budged since 2020.
Delinquencies of Non-Student Loan Debt on the Rise
Total household debt balances grew $228 billion in Q3-2023 across all household debt types, including student loans. According to the New York Fed, retail credit card and auto loan delinquencies are rising, with the youngest generation sharing the bulk of newly delinquent accounts. This is unfortunate since Gen Z also bears the majority of new student loan debt.
All signs point to growing delinquencies among student loan borrowers as well.
Student Loan Servicer Issues Continue
The first month into the return to repayment saw two-hour wait times and site crashes for Federal student loan servicers. Issues have continued through November. Many borrowers have reported being placed into forbearance without notification or an explanation.
Additionally, applications and paperwork processing errors for income-driven repayment plans and forgiveness programs continue. Accurate information about repayment options and outcomes remains unclear, outdated, and difficult to find.
Education Department’s Framework to Protect Borrowers
The Education Department has been monitoring servicers and recently released a framework to address borrower complaints. Their monitoring practices include “secret shoppers” to evaluate the accuracy of servicers’ responses to borrowers’ questions, partnering with agencies such as the CFPB, and tracking publicly available complaints like those in the above video.
The Education Department has promised to hold servicers accountable through financial penalties, re-allocation of borrowers, and similar corrective action plans.
IonTuition has been busy helping borrowers navigate their repayment. As a third-party servicer, our team supplements Federal servicers and alleviates wait times for borrowers. Our online platform allows borrowers to apply directly for income-driven repayment plans. We’re partnering with schools