Student Loans: Stressors and Pitfalls as Repayments Begin and CFPB Actions Against Alleged Fraudulent Conduct By Angela L. Beblo, Spilman Thomas & Battle, PLLC On March 13, 2020, near the beginning of the pandemic in the U.S., the CARES Act included a pause for all federal student loans. Nearly 90 percent of student borrowers accepted “the option of pressing the pause button on their” student loans. Thus, the U.S. Department of Education ceased loan payments, applied a 0% interest rate, and stopped collection on defaulted loans (including garnishments). That pause has been extended repeatedly, and borrowers for certain student loans have not been required to make payments for nearly two years. [1] Despite the pandemic pause, the CFPB has actively been engaged in investigation and enforcement activity relating to student loans. Payments Resume As the deadline for payments to resume nears, many experts are sounding the alarm that borrowers are unprepared to restart payments on their student loans. A recent survey of 23,000 borrowers found that 93% of borrowers are “not prepared to resume payments” on their student loans.[2] “Even before the pandemic, the country’s outstanding student loan debt balance exceeded $1.7 trillion and posed a larger burden to households than credit card or auto debt. Roughly a quarter of borrowers, or 10 million people, were estimated to be in delinquency or default.”[3] According to the president of the Student Debt Crisis Center, “The ongoing pandemic combined with unprecedented inflation are huge obstacles for borrowers who are, by and large, not ready to resume payments, struggling to afford basic needs, and confused about their options moving forward.”[2] The Government Accountability Office report found an increased risk of delinquency for up to half of federal student loan borrowers as repayment begins.[3] Part of this increased risk results from outdated contact information, making communications about payments more difficult.[3] The good news is that “the amount due will be largely the same since interest on most federal student loans was suspended during the government’s payment pause.”[2] While borrowers are not facing increased student loan payments, borrowers are still facing rising inflation and an increased cost of living that occurred while payments were paused.[2] For those who cannot afford to restart payments, exploring options, including income-driven repayment plans, wvbankers.org 16 West Virginia Banker
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