'Good Luck Finding It'- Confused Borrowers Scramble for Student Debt Relief Details

Many borrowers are likely to treat the process with urgency given that a pandemic-era freeze in student loan repayments is set to expire in January. More than half of those who qualified for forbearance haven’t made a student loan payment in nearly three years after the Trump administration first paused them in March 2020. Biden opted to extend the policy several times amid economic uncertainty.

Education Secretary Miguel Cardona acknowledged the uphill battle on Sept. 7, saying the department is trying to “simplify” processes so people aren’t overwhelmed when they apply.

“We have a dedicated team at the Department of Education that is working closely with the White House, leveraging the expertise gained from past implementation efforts, and meeting daily to implement the student debt relief plan,” a Department of Education spokesperson said in a statement.

Already, though, there have been stumbles. In the day following Biden’s declaration in August, visitors to StudentAid.gov faced delays in accessing the website and some got an error message about high volumes of web traffic. Websites for student-aid servicers, who typically act as the middlemen between the government and borrowers, struggled to keep up with heavy user loads.

Borrowers say they are struggling to figure out what steps to take to ensure they access relief.

“I’m actively pursuing this information and it’s still confusing,” said Katriel Paige, a 37-year-old in Virginia who holds over $150,000 in federal loans. Paige has signed up for newsletters and joined student debt groups to help understand the process.

“It’s like they're saying, ‘good luck finding it,’” Paige said.

Race Against Time

The majority of the roughly 43 million borrowers who qualify for relief will need to fill out an online application form beginning in early October to verify their incomes to prove their eligibility. Once complete, those applications will take four to six weeks to process, the Department of Education has said. (The department already has income information for some 8 million borrowers, whose relief will be automatic.)

That makes for something of a race against time for the government to spread the word about the program and for consumers to take advantage of it: Borrowers should complete forms by November 15 so they are processed before loan payments resume in January, according to an infographic tweeted by Cardona.

Since Biden’s announcement on Aug. 24, the White House has published a fact sheet about the forgiveness plan. The Department of Education also published a resource guide and urged people to follow its Twitter account for more, and Cardona has used social media to share information.

“Our goal is to provide borrowers a seamless and simple experience, working closely with the servicers who will actually process the relief, and we will have additional information for borrowers in the coming weeks,” said the Department of Education spokesperson in a statement. In the meantime, they are encouraging borrowers to sign up for email updates at the federal student aid website.

But such messaging may not be enough, warned Max Lubin, the chief executive officer of Rise, a student-debt advocacy group. Someone who follows the education secretary on Twitter “already cares and is informed,” he said. “It's the people who are not even aware of the student debt relief announcements who I'm most worried about.”

Organizers say that could include borrowers who are older, do not speak English as their primary language or lack consistent access to technology. Paper applications will be available only after the initial online rollout, according to the department's FAQ.

Fragile Infrastructure

A crush in applications will also test a strained system. Severe understaffing is an ongoing issue in the Office of Federal Student Aid, which failed to complete a fifth of its workload in fiscal 2020 due to staff shortages, according to a Government Accountability Office report. Staff headcount grew by just 6% from 2010 to 2019, even as the office’s loan portfolio grew by 450% and the number of borrowers more than doubled.

Loan servicers — borrowers’ direct point of contact for questions about their loans — are also spread thin. Staffing levels fluctuated greatly throughout the pandemic and are now lower than they were in March 2020, said Scott Buchanan, executive director of the Student Loan Servicing Alliance.

Servicers learned the details of the forgiveness plan at the same time the public did, Buchanan said, and are now working with the government on guidance for answering borrowers’ questions.

When asked about the average call hold time at servicers after Biden’s announcement, Buchanan said: “It’s not short.”

Political Calculus

One harsh reality for Biden is that some of these potential impediments to the success of his program stem from the political calculus he made in formulating it.

Biden and his aides debated for months about how to ensure the new loan forgiveness only went to middle- and low-income individuals, a goal that was consistent with the president’s preferences, but also provided a defense against inevitable Republican attacks that the policy was a handout for the affluent. The administration eventually settled on a $125,000 individual income threshold for individuals. The cap means that the top 5% of earners will be excluded from debt relief, with 87% of forgiveness going to those who make less than $75,000 per year, the White House said.

But advocates say the opt-in application process could’ve been avoided with an automatic forgiveness plan that did not include an income ceiling. Under such a model, the bulk of relief would have still gone to people making less than $150,000 per year, according to an analysis by the People’s Policy Project — because that group holds the vast majority of student debt to begin with.

“​​When the Biden administration decided to impose an income cap, they created this extra hurdle for borrowers, and even with the best intentions, we see that oftentimes those systems don't work out,” said Rise’s Lubin.

The Department of Education and a recent US Government Accountability Office report found that when borrowers are required to apply for debt relief if their school abruptly closes, roughly half of those who are eligible miss out — underscoring the importance of messaging about who qualifies for such programs, said Abby Shafroth, a staff attorney focused on student loans at the National Consumer Law Center.

The Biden administration has experience with this dynamic. In June, for example, it offered blanket forgiveness to borrowers who have been defrauded by Corinthian Colleges after fewer than half of those eligible applied to have their loans wiped even after multiple rounds of outreach. Those applications were substantially more burdensome than the upcoming forgiveness application is likely to be, but the size of the new program still makes for a massive outreach undertaking at the department.

Of course, some challenges are far outside Biden’s control. Republican groups may decide to sue over debt cancellation.

Meanwhile, Jay Fleischman, a student debt lawyer with Money Wise Law who answers questions about debt forgiveness on TikTok, said he sees people conflate the Biden administration’s proposed policies with older information and worries that might spell trouble.

“When you're stressed and panicked and anxious about something, it becomes that much more difficult to think clearly,” he said. “And in the absence of transparency from the system, this is what you get — mass confusion.”

Bloomberg News provided this article. For more articles like this please visit bloomberg.com.

Read more articles by Ella Ceron, Mackenzie Hawkins