Student-loan companies will scramble to adjust and some borrowers could fall into delinquency if Biden extends the payment pause on 'grossly insufficient notice', servicing group says

• Student-loan payments are going to resume in a few days.

• Companies might not be able to implement changes effectively on short notice according to the head of a loan servicing group.

• If payments resume, borrowers will be caught off guard.

The companies that service those loans might not be able to account for that change in a timely manner even if President Joe Biden extends the student-loan payment pause.

The federal pause on student-loan payments was extended by Biden four times. The pause is expected to be extended on Wednesday. Loan servicers have told the department that any announcement will likely not be implemented as smoothly as it might hope, because they haven't received a lot of information leading up to this point.

Scott Buchanan, the executive director of the Student Loan Servicing Alliance wrote a letter to the Education Secretary on Monday stating that any announcement at this late date, less than ten days before the scheduled restart of September 1, risks operational disruptions.

We are now ten days out from the scheduled restart for 35 million borrowers, and as servicers have warned for weeks, it may not be possible to ensure that a full and complete delay in restart could be effectuated systemically by September 1. Ten days is not enough to reprogram the massive and interwoven systems that handle loan accounts, provide appropriate system testing time, and also build and implement revised communication plans.

Millions of borrowers will be confused, some may be off guard, and it may take months to resolve those issues if payments resume on September 1.

Loan companies were told by the Education Department to stop talking to borrowers. There have been communication issues since September 1 is still the anticipated restart date. Insider obtained evidence that Aidvantage, run by student-loan company Maximus, mistakenly notified some borrowers that they have to make payments in September.

Insider heard from borrowers who said they never received an apology and their accounts were still showing payments due. Democrats have been pushing for debt cancellation and an extension of the payment pause to make sure the department and loan companies have enough time to implement relief before another bill comes due.

Buchanan said that there may be servicing issues that impact borrowers and that servicers will do their best to "quickly and efficiently" make any changes.

Business Insider has an article on it.