During the 2020 Presidential Election, the possible student loan pause Biden touched upon was one of the critical topics debated among the candidates. Now, roughly a year into the Biden presidency and with the nation’s economy still trying to overcome the effects of the COVID-19 pandemic, President Biden’s promises of student loan forgiveness are under the microscope more than ever.
This blog has been updated on December 23rd, 2021, in light of the recent extension of the student loan pause.
A shakeup in loan management and how it affects the student loan pause
Recently, two of the most prominent loan servicing companies have announced that they will no longer service student loans when their contracts end. In July, The Pennsylvania Higher Education Assistance Authority (PHEAA) was the first to announce its withdrawal. PHEAA, which operates FedLoan servicing, informed employees that they would stop their student loan services upon the expiry of their contract in December of 2021. Less than two weeks later, Granite State Management and Resources, a company that benefits over a million student loan accounts, announced that it would suspend student loan operations by the end of the year.
The impending transfer of student loan servicers
To make matters more complicated, the transfer of these roughly 10 million student loan accounts will occur while the moratorium on federal student loan payments is ending. The CARES Act student loans moratorium temporarily suspended repayment requirements on student loans due to the pandemic-related recession. While the initial suspension of student loan debt was supposed to last six months, it has been extended multiple times. However, the current suspension is ending on April 31, 2022. The process of reassigning the management of these 10+ million federal student loans is almost sure to be messy. To make things more complicated, the COVID-19 Delta Variant is threatening to throw the economy right back into a tailspin. To say that things are complex when it comes to the topic of the student loan pause would be an understatement.
What did the CARES Act do for the proposed student loan pause?
The CARES Act was enacted in March of 2020 to combat the financial impact associated with the COVID-19 pandemic. The Act suspended the required repayments on federal student loans beginning on March 13, 2020. It also automatically dropped the interest rates on those loans to 0.0%. It is crucial to note that private student loans and federal student loans not owned by the Education Department aren’t applicable to the CARES Act.
How can Spinwheel help?
Spinwheel was founded during the student loan crisis as a means to help friends and family members. Along with millions of other Americans, Spinwheel’s primary focus is on helping borrowers get out of debt sooner. We believe that debt isn’t something that should hold you back from living your life. This is especially true when it comes to debt obtained to pursue the career of your dreams.
Spinwheel’s embedded debt API allows applications to connect to a borrower’s debt account and access data in real-time. We provide companies with the ability to offer different payment options such as loyalty points and round-up programs. Now, student loan refinancing is a new feature that’s available for any company to add on. Our technology also includes a layer of intelligence to assist the B2B company and its borrowers. By all accounts, the student loan industry will continue to get more complex in the future. Let Spinwheel help you provide the services that you need.
Spinwheel has developed cutting-edge debt APIs that focus on ease of access. This makes your already familiar financial wellness and debt repayment apps smarter and more efficient than ever. From letting a customer use their financial data to optimize their loan payments better, helping employees manage debt efficiently, or simply offering a debt repayment calculator to help customers gain quick insights, Spinwheel is the leader in unlocking consumer value with debt APIs and thanks to their easy-to-use drop-in API modules; your developers can customize and implement quickly. Spinwheel has a strong focus on helping tackle student loans and helping students get out of debt sooner. Learn more about Spinwheel here or contact our sales team here.