A $49,000 monthly student-loan bill and incomplete debt relief: Borrowers are facing confusion as repayment looms (2023)

  • Some student-loan borrowers are running into hurdles leading up to the payment resumption.
  • Insider spoke to borrowers with inaccurate monthly statements and incomplete debt relief.
  • While their loan companies said the issues might be fixed, there's a time constraint with interest restarting in September.

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When Jess saw what her monthly payment would be in October, she couldn't believe her eyes: $49,726.63 due on October 15, according to documents reviewed by Insider.

Jess — who requested to use a pseudonym for privacy but whose identity is known to Insider — knew when she was alerted by her student-loan company on August 1 that this payment is a mistake. So she called the company, and a customer service representative agreed that the five-figure monthly payment is not accurate. But Jess said she's called four times already, and her balance has yet to be fixed — and interest on her loans will resume in two weeks regardless.

"It was obviously unreasonable," Jess said. "You'd have to be unable to fog a mirror to think that this was reasonable. There's just no way. Absolutely no way."

After an over three-year pause on federal student-loan payments and interest to give borrowers financial relief during the pandemic, interest is set to accrue again starting in September, with bills due one month later. Jess has a $198,906 outstanding balance she was planning to pay off on an income-driven repayment plan — prior to the pause, she said she was paying around $137 a month. With her payments currently set on auto-debit, she's worried the nearly $50,000 payment will not be resolved by the time the pause ends, and money she does not have will be withdrawn from her account.



"If they don't change anything, at a very minimum, what happens is I immediately go into default, because there's not enough money in my bank account," she said.

Jess's incorrect monthly payment statement is just one of the challenges borrowers are facing as President Joe Biden's Education Department and federal student-loan companies work to transition millions of borrowers back into repayment. It's an unprecedented transition, and with every borrower having a unique repayment situation, broad guidance on repayment often is not sufficient.

Scott Buchanan, executive director at the Student Loan Servicing Alliance — a group overseeing federal student-loan servicers — told Insider that the issues borrowers are experiencing can be traced back to the lack of resources at the Education Department.

"They don't have enough resources to provide the services and we can only put as many people on the phone as the department can pay for, and so that is a generalized constraint," Buchanan said. "Then, some of the challenges we've had in the past have been about lack of coordination, which is when the department makes major announcements, doesn't tell anybody that they're going make them. We have to staff based upon what we know is coming down the pike. And I think that that is one of the the other concerns here."



"So it's combination of both things, which is just that there's only a limited amount of resources to provide staffing and when we have these huge spikes, because of some sort of communications, then there's not an ability to really provide any more resources because the government doesn't have those resources," he added.

An Education Department spokesperson told Insider that the department will continue to regularly communicate with borrowers, along with working with its contractors to help borrowers determine their best repayment options. The spokesperson also said it is in frequent communication with servicers to ensure they are communicating directly with borrowers about their options for repayment.

The Education Department has previously acknowledged that minimal funding poses challenges to its operations, and it requested Congress increase funding for the upcoming fiscal year's budget by $620 million — something it said "is essential to support students and student loan borrowers."

"The increase would allow FSA to continue to operate the student aid programs, implement critical improvements to student-loan servicing, continue to modernize its digital infrastructure, and ensure successful administration of the financial aid programs through a simplified and streamlined application process for students and borrowers," the department previously said.



'It feels utterly hopeless'

Amid concerns with the repayment resumption, the Education Department had some good news for borrowers — it has begun discharging $39 billion in student debt for over 800,000 borrowers who made the qualifying 20 or 25 years of payments on income-driven repayment plans. This announcement was part of the department's one-time account adjustment to get relief to borrowers who have reached the repayment threshold.

Karin Smith, 57, was one of the borrowers who was notified she was eligible for relief, and on Tuesday, she was happy to see that her $71,000 loan — the biggest of the three loans she held — was gone. But the $14,0000 interest on that loan was still there, and tacked onto her smaller $8,000 balance, according to documents reviewed by Insider. She said she called customer service and they told her to wait ten days to see if the interest goes away. But with interest on her other federal loans set to start building again in September, Smith said she's worried it won't be resolved in time.

"It feels utterly hopeless," she said. "It's not that I'm not glad that the $71,000 has gone, but it's just like, I'll die with this. And my 16-year-old is getting ready to go to school himself and I'm still paying off my loans. It's been 30 years, haven't I done enough?"

Along with the hurdles Jess and Smith have run into, Insider has previously spoken to borrowers in the past who could not reach their loan company due to hours-long hold times with customer service, leaving them in repayment longer than they needed to be. Insider previously reported that one company, Nelnet's, call center temporarily shut down during an influx of requests from borrowers.



Additionally, some borrowers have told Insider via email and on X, formerly Twitter, that they are unable to access their payments due to technical errors on the loan company's website, making it impossible to financially plan for repayment. Nelnet, one of the federal servicers, told a borrower on X that "there could be a few reasons why payments are not showing. The best assistance for this issue will come from a representative on the phone. That way if needed they can research the issue further for you." Of course, the long hold times make doing so difficult.

As Buchanan said, the issue for the servicers are limited resources — and it's something Education Secretary Miguel Cardona is asking Congress to address.

"Right now, House Republicans are pursuing an appropriations bill that cuts $22.5 BILLION from education," Education Secretary Miguel Cardona wrote on X last month. "It's the lowest allocation in 15 years. They are defunding education. Let's call this what it is - a Republican attack on our students' futures."

Are you experiencing challenges with repayment? Do you have a story to share about student debt? Email this reporter at asheffey@insider.com.



Update: August 21, 2023 — This story was updated after publication to include comment from the Department of Education.


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