Impending Challenges Even if Student Loan Debt Relief is Upheld

Overwhelming numbers of borrowers will resume student loan payments in 2023. This is likely to trigger a repayment crisis. The scale of the crisis hangs on the Supreme Court’s ruling on the Biden-Harris Administration Student Loan Debt Relief program.

The Court’s Role in the Crisis

The Supreme Court’s ruling on the Biden-Harris Administration Student Loan Debt Relief program will not cause the repayment crisis. However, it will determine the magnitude of the problem.

A ruling against debt relief provides the worst case scenario: Over 27 million borrowers will enter repayment 60 days after the ruling. We suspect a large percentage will be unable (or just choose not) to make their monthly payments.

If the program is allowed to move forward, more than 40 million borrowers will be eligible for some relief, with nearly one-third of all borrowers having their accounts completely paid off. That reduces both the number of borrowers resuming payments and the monthly payment for those that have a balance remaining.

The Coming Repayment Crisis

The systems supporting federal student loans weren’t designed for repayment to entirely stop and restart after more than three years. Everything from the process to the technology supporting it were created to support a steady stream of borrowers as they exited school. But the resumption of payments will flood those systems with up to 36 times the number of students they were built to support in a month.

What’s worse is that today’s borrowers are much more financially fragile than before the student loan payment pause. Another large monthly payment could wreck their personal budgets. When struggling borrowers reach out to their loan servicer for help through traditional channels, the overwhelming majority won’t get through. Left with few options, many will slip into delinquency.

Navigating the Crisis

Regardless of the Court’s decision, student loan delinquency will rise. There are simply too many economic and systemic factors working against borrowers. Debt relief may greatly reduce the scale of the repayment crisis, but it will not stop it.

What can you do? Take advantage of the calm before the storm. Call center traffic is currently low, but that won’t last. Reach out before the Supreme Court’s decision. Use your existing networks to provide the information and support borrowers need.

• Provide consistent, accurate information to borrowers. Schools are a trusted resource that can keep former students up to date on changing news and rules surrounding repayment. Take action as soon as possible. The best time to prepare a borrower for success is before the first payment is due.
• Remind borrowers to update their contact information. You can’t help a struggling borrower unless you know how to reach them. Make sure your former students update their contact info today, before call centers are overwhelmed.
• Ask borrowers to review their repayment plan. Encourage borrowers to review their payment plan NOW. If their monthly payments will be unaffordable, they can apply for an income-driven repayment plan. If they wait until the payment pause ends, it will be nearly impossible to reach their loan servicer.

Student Connections Can Help

Take care of your former students by teaming-up with a trusted partner. Student Connections can strategize and execute a customized, multi-channel campaign designed to inform and counsel them through the coming repayment crisis.

We currently represent more than 300 schools, and support over 8 million borrowers across the United States. Using a combination of phone calls, emails, and text messages, we connect former students to information they need to succeed.

We also take time to personally counsel borrowers who have questions or want a better understanding of their options. Our experienced borrower advocates have advised over 700,000 borrowers throughout the payment pause.

If you want help preparing for the repayment crisis, contact Student Connections today.