Government in Crisis: Federal Workers and Access to Loans Threatened by Government Shutdown Threats

As the deadline for a potential government shutdown approaches, the fate of thousands of federal workers hangs in the balance, including their access to student loan repayment assistance. At the same time, concerns are mounting about the readiness of federal student-loan servicers as borrowers prepare to reenter repayment. 

Crafting Plans

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Amidst the looming government shutdown threat, federal agencies have started crafting contingency plans to navigate limited appropriations.

Losing Pay

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The Committee on House Administration has unveiled its plan for Capitol Hill staffers, revealing that no employees will receive pay during the shutdown.

It is worth noting, however, that the member of Congress will still receive pay despite their role in the government shutdown.

Student Loan Repayment at Risk

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While healthcare benefits will continue for all staff, some benefits, like the Student Loan Repayment Program for Hill staffers, are at risk.

This program grants employees up to $833 in monthly repayment benefits, but these benefits may lapse during a shutdown.

Good Standing Loans

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The House Administration Committee says, “Employees participating in the House’s Student Loan Repayment program always retain loan responsibility and should make any payments due, as required, to ensure their loans remain in good standing and continue to be eligible for the program.” 

Payment on Behalf of Employees

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The Student Loan Repayment Program for Hill staffers states, “The aggregate amount of payments made on behalf of an employee cannot exceed $80,000, and members of the House are not considered eligible for the program.”

However, members of Congress will continue to receive their salaries during a shutdown, protected by Article I, Section 6 of the Constitution.

Concerns About Student Loan Servicer Preparedness

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While the government shutdown poses many challenges, student loan servicers also grapple with significant concerns.

MOHELA Concerns

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MOHELA, one of the major student loan companies servicing over 7 million borrowers, expressed concern about its readiness to handle the impending wave of borrowers reentering repayment. 

7.7 Million Borrowers

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The company manages the Public Service Loan Forgiveness portfolio and anticipates servicing over 7.7 million borrowers by October 1.

However, MOHELA faces resource constraints and funding issues, hindering its ability to assist borrowers efficiently.

Changing Demands

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MOHELA cited rapidly changing demands, such as litigation outcomes and the need for higher-level training for customer service representatives, as factors straining its budget. 

Servicing Delays

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The company warned that extensive servicing delays are likely as it faces “an unprecedented surge in activity in the near future, one which is expected to last well into 2024.”

Constant Complaints

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It’s worth noting that many borrowers have already experienced customer service issues with servicers, including long wait times on the phone and inaccurate payment statements. MOHELA alone received over 36,000 complaints from July 2022 to June 2023.

A Common Issue

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Nelnet, another federal servicer, expressed uncertainty about its ability to predict the number of borrowers it will service, citing the evolving nature of relief programs and funding uncertainties.

6 Million Transfers

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These concerns are not unfounded, as responses to previous inquiries revealed that nearly 6 million borrowers had not created accounts with their new servicers that resulted from transfers during the pandemic.

Borrowers have reported hours-long wait times when seeking assistance, resulting in thousands of complaints.

Lawmakers’ Response and Borrower Impact

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Senator Elizabeth Warren and her colleagues have pressed servicers for information on their preparedness for the repayment transition and expressed doubts about their claims based on lack of funding. 

Warren Is Skeptical

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In a letter from Warren, she was “skeptical of (servicers) claim that insufficient funding is keeping them from fulfilling their most foundational obligation considering that they were paid on average approximately $2 a month per account amounting to billions of dollars, while payments, interest, and collections were suspended during the public health emergency.”

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The post Government in Crisis: Federal Workers and Access to Loans Threatened by Government Shutdown Threats first appeared on Back Edge News.

Featured Image Credit: Shutterstock / Pormezz. The people shown in the images are for illustrative purposes only, not the actual people featured in the story

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