After President Joe Biden announced broad student-loan forgiveness, the companies that service those loans are still trying to figure out how to implement it.
Biden said at the end of August that he would cancel up to $20,000 in student debt for federal borrowers. The majority of people will need to apply for the relief in October, according to the Education Department. The mechanics of actually being able to qualify for relief are still not understood by borrowers and student loan companies.
Jack Remondi, CEO of Navient, spoke at the Global Financial Services Conference about the lack of clarity in the debt relief plan.
The most challenging thing for us right now is what we don't know. There is more we don't know about the plan and the program than we know. It's caused a lot of confusion. After the announcement, call volume spiked almost eight times the normal level, and we had to say "we don't know."
Privately held loans within the Federal Family Education Loan (FFEL) program are not eligible for federal debt relief. The Education Department has advised FFEL borrowers to consolidate their loans into federal direct loans to make them eligible for loan forgiveness, but it is assessing whether to make those loans eligible for relief without any action.
It would be a pretty significant undertaking to require all those borrowers to consolidate.
The most important thing that we're looking for is to allow borrowers to receive the benefit of loan forgiveness that they are eligible for where their loans are held today so that we don't require people to consolidate.
Remondi's sentiment was echoed by a worker at a small student-loan company who said that the Education Department's lack of guidance was causing confusion.
It would take months to get the forms through when the department was behind on them. If the consolidation doesn't happen before the end of the year, will these applications be accepted for forgiveness? Is it possible to put in the request in advance? Is anyone who had the consolidation application going to be taken?
The administration was warned before Biden's announcement that announcements of relief with very little notice could cause problems. The department maintains it has the ability to carry out this loan forgiveness effectively and that once the application forms become live borrowers should try to apply as soon as possible to get relief before payments resume next year
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