WASHINGTON — The federal government’s student loan servicing contractors have been instructed to hold off on sending billing statements ahead of an Aug. 31 deadline for ending the pandemic freeze on loan payments, giving companies little time to start loan collection processes if payments resume.
The future of the federal student loan portfolio is in limbo as President Joe Biden considers whether to cancel a limited amount of debt for borrowers whose incomes fall under a certain threshold. The president and his advisers have been debating the issue for more than a year, frustrating activists and progressive Democrats, and putting borrowers, loan servicers and other stakeholders on edge about what happens next.
Scott Buchanan, the head of a loan servicer industry group, said the Education Department has told loan servicers that they shouldn’t be communicating with borrowers about resuming payments. That message was reiterated in a call in recent weeks between department officials and a servicing company, Buchanan said, prompting speculation in the industry that the administration will further extend the pause on payments.
“The situation is that we’re almost 30 days away from the planned resumption and the department has been telling servicers to hold off on resumption communications for the last few months,” said Buchanan, the executive director of the Student Loan Servicing Alliance. “Maybe the department expects that the White House will yet again kick the can down the road.”
Biden told reporters last month that another extension was on the table. Democrats close to the White House said they think it is unlikely that the president will choose to restart loan payments just months before the November midterm elections.
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