The COVID-19 pandemic upended nearly every sector of the economy — including the student loan portfolio, where monthly payments and interest accrual on federal student loans have been paused since March of 2020.
Now that the administration is once again approaching a wind-down of the policy, borrowers are left to contend with how to navigate their repayment obligations. New regulations have offered a litany of changes to borrowers’ options concerning their repayment plans, the servicer landscape has changed, and some borrowers — who graduated during the pandemic — are embarking on the repayment process for the very first time.
As things stand, the ongoing student loan payment pause is set to expire 60 days after the United States Supreme Court concludes the litigation surrounding student loan debt cancellation or, if there is not a decision by June 30, payments would then resume at the end of August.
In order to prepare for these logistical challenges surrounding the transition back into repayment, NASFAA convened a task force of financial aid practitioners and charged it with developing informed considerations for how schools can assist borrowers in preparing to resume or begin repayment, as well as how schools can prepare for potential operational and accountability impacts that the resumption of repayment will have. The task force today published its final report, as well as a toolkit for financial aid professionals.
While much of the repayment landscape hinges on the Supreme Court’s decision concerning the student loan debt cancellation program, the task force has provided a clear framework to assist institutions and students preparing for the return to repayment.
Anthony Jones, chair of the Resumption of Loan Repayment Task Force, said that a paramount issue will be communication efforts and needed partnerships to ensure that financial aid professionals serve as good partners in helping students understand how to best be prepared and to navigate the change back into repayment.
Earlier this year Jones, who currently serves as executive director of financial aid and scholarships at the University of Utah, detailed the task force’s mission and explained how they’ve navigated their work amid the administration’s shifting timelines and the unique challenges the federal pause has presented.
Jones reminded professionals that the payment pause is just one aspect of the major overhaul occurring within the student loan portfolio, and that other initiatives will directly impact aid offices.
“Some of the changes resulting from not just the pause, but the new initiatives like the ‘Fresh Start’ initiative, that's changing who's eligible and how we need to do counseling, and to prepare for repackaging students who previously would [not] have been eligible but now are,” Jones said.
In order to respond to this landscape, the task force developed a Student Loan Repayment Toolkit with tips and resources that institutions can use in communicating to borrowers.
These communications come in a variety of formats, such as social media posts, graphics, and one-page handouts. They can be distributed in a number of ways, including email, social media, postal mail, flier distribution, and more. Based on the needs of an institution’s borrowers, the content can be adapted for appropriate emphasis and specificity.
The task force also detailed how institutions can best comply with regulations concerning operational and accountability metrics that are tied to student loan repayment, which include cohort default rates (CDR), repayment rate calculations, and best practices for default reduction initiatives.
“Schools can use the toolkit to communicate outward not only to borrowers, but to the community at large so that employers may be able to help, or nonprofit organizations, or even in some cases, schools may choose to work with a vendor to help with the default management or communications to help spread the word,” Jones said.
The higher education world is aware of how all-encompassing the resumption of repayments is slated to be. Federal Student Aid’s (FSA) Chief Operating Officer Richard Cordray recently said that “the day of reckoning has finally arrived,” when speaking about the effort to resume repayments.
Jones said he is hopeful that policymakers and those outside the profession appreciate the magnitude of transitioning millions of borrowers back into repayment.
“A lot of us in the financial aid profession, certainly, and the servicers, they're aware of the impact,” Jones said. “The goal of the report is to help raise awareness of how to react and prepare as best as possible.”
Publication Date: 5/8/2023