A senior student loan official warns of possible administrative and financial challenges for borrowers when the government resumes collection of millions of student loans on January 1.

“It’s reasonable to expect that there could be an increase in complaints,” when the coronavirus-related hiatus on student loan payments and collections resumes, Robert Cameron, the Student Loans Ombudsman at the Consumer Financial Protection Bureau, wrote in the ombudsman’s annual report. published wednesday. “It is also reasonable to anticipate that, as with any transition, there may be a risk of confusion among borrowers and harm to consumers.”

The warning comes days after Congress abandoned plans for a new coronavirus relief program ahead of the elections, and as defenders urge the Department of Education to extend the suspension of student loan payments and collections beyond December 31.

In August, President Donald Trump extended the freeze – which began with the CARES Act in March and was due to end on September 31 – until the end of the year. But defenders warned that borrowers are unlikely to be in a better position to repay their loans, given the still widespread unemployment.

In addition, they say, the student loan system may not be ready to integrate millions of borrowers at once. The ombudsman’s report highlights potential challenges with automatic debit, inaccurate billing, and recertifying borrowers so they can stay on manageable repayment plans.

Persis Yu, director of the student loan assistance project at the National Consumer Law Center, said the ombudsman would struggle when payments resumed “absolutely right.”

“At some point the repayment will restart and we have to be careful to make sure borrowers are receiving the best possible service at that time,” she said. “A lot of things will go wrong and it’s CFPB’s job to make sure that doesn’t happen.”

Yu added that she would like to see more details on the borrower complaints, as they can provide insight into the challenges borrowers may face and the steps CFPB is taking to address those issues.

The Ministry of Education and its contractors had difficulty implementing the suspension of payment upfront. Up to 5 million borrowers have suffered an error in their credit score as a result of the payment break. Months after the freeze, nearly 3,000 borrowers default were still have their paychecks seized to pay off student loans.

Between March 1 and August 31, an average of 20% of complaints received each week by the CFPB mentioned COVID-19, according to the mediator’s report on Wednesday. The agency received approximately 500 such complaints during this period. The most frequently reported problem was with a lender or managing agent.

The report offers suggestions to avoid harming consumers when the student loan system is reactivated. On the one hand, the ombudsman suggests that policymakers consider making both types of federal student loan borrowers eligible for coronavirus relief – a step borrower advocates have urged. Currently, the payment and collection freeze only applies to borrowers with federal student loans. This means that at least $ 165 billion in federal student loans held by commercial lenders do not qualify for the payment suspension, according to Mark Kantrowitz, the publisher of SavingforCollege.com.

“Policymakers may consider creating parity so that all federal loans, regardless of who owns them, have the same options for relief now and in the future,” the report read.

As for when the student loan system is finally restored, the report suggests that a variety of stakeholders, including consumer advocates and state regulators, are systematically communicating and contacting borrowers about resuming payments. .

Additionally, the report suggests that borrowers who are having difficulties with their student loan companies that cannot be resolved should contact regulators, including law enforcement officials.

Seth Frotman, executive director of the Student Borrower Protection Center and former CFPB student loans ombudsman, described the approach as “a complete repudiation of the Trump administration’s efforts to try to block state oversight on loan managers. students ”.

In recent years, the federal government, states, and student loan companies have locked in a battle over who has the power to regulate businesses. The Ministry of Education has argued that state laws governing student loan managers – the companies that process student loan payments – are essentially invalid because they undermine the federal government’s efforts to manage the student loan program.

“The ombudsman rightly speaks about the real risk that student loan borrowers will face when the payment break is eased,” said Frotman. “One of the things they are calling out that will be critical in protecting borrowers is state law enforcement officials.”

In addition to highlighting the challenges borrowers may face once student loan repayments pick up, the report highlights other trends in the student loan market, including its disproportionate impact on Black and low income borrowers.

“What stands out most is the way the Student Loans Ombudsman denounces the serious problems facing borrowers in the student loan market, while the larger CFPB does nothing to help these same borrowers.” said Frotman, noting that, for example, the agency stripped its fair loan office has enforcement powers.

In the student loan market in particular, the Trump-era CFPB focused its enforcement actions on debt relief scams. For years, these surveyed companies have sought to take advantage of borrowers who are struggling to repay their loans by asking them to enroll in government payment plans that allow borrowers to repay their debt as a percentage of their income – which borrowers can do it themselves. free.

In many of these enforcement actions against debt relief scams, the agency has imposed penalties on defendants who were a small fraction of the amount they allegedly defrauded from consumers. It’s part of a larger, less aggressive approach to protecting borrowers, Frotman said.

For example, in 2018, the agency A report on the challenges college students face with credit cards was only released a year after its completion and under pressure. In 2018, while Mick Mulvaney was temporarily head of the agency and after Frotman – who began his tenure as CFPB’s student loans ombudsman under the Obama administration – resigned in protest, the agency did not publish its annual report on student loans at all. This year, the report came about 10 days later than usual.

Dodd-Frank demands that the agency publish the report on the “same date every year»To the Secretary of Education as well as to certain committees of the House of Representatives and the Senate. The first report was published on October 16, 2012, which is why the reports were published or around this day the following years.

Unlike the Trump-era CFPB, the Obama administration’s CFPB focused on the big players in the student loan market. The agency continued Navient,

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2017, accusing the company of making it unnecessarily difficult for borrowers to repay their loans. Navient called the “false” and “unfounded” allegations and asked for the action to be dismissed.

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