Student loan payments are resuming. Here’s what worries the top U.S. consumer watchdog
Rohit Chopra, a Voorhees native, is particularly concerned about borrowers facing long wait times when they try to call their loan servicers with questions.
Student loan payments resume in October after the pandemic pause, and Rohit Chopra is worried.
Not because he is a borrower who has to make room in his monthly budget for a $200 to $300 (or more) payment.
Chopra is concerned because, as director of the Consumer Financial Protection Bureau, he is tasked with looking out for the 27 million people with federal student loans, a group that includes about 3 million borrowers in Pennsylvania and New Jersey.
The CFPB fields thousands of consumer complaints a week. As interest on federal loans starts accruing again this month and payments will soon be due, an increasing number of those complaints are about student loans.
Chopra is particularly concerned about borrowers facing long wait times when they try to call their loan servicers with questions.
The Voorhees native and Wharton graduate talked about those concerns — along with a wide range of other topics — during a visit to The Inquirer office, a stop he made in between an event in Camden and the Eagles-Vikings game.
“In this time where we are wanting to ensure that people can stay financially strong, this student loan repayment restart is something we’re watching like a hawk,” Chopra said.
The following interview has been edited and condensed for clarity.
What are you hearing from student loan borrowers right now?
Issues related to customer service, issues related to the calculation of their payment, whether their payment was properly processed.
For a student loan borrower who is restarting payments, it’s a huge source of anxiety because many of them are younger. Many of them are starting out in life. And if something goes wrong, they feel like they can kiss goodbye buying a home or getting an auto loan.
You mentioned it being difficult for borrowers to reach a human at their servicer if they have questions. What should these servicers be doing differently, acknowledging that they also have been subject to budget cuts?
They are private contractors. They bid on business. They have to fulfill their end of the bargain, and they also have to follow the law.
What we have been finding is there are some servicers where wait times have been unusually high to talk to people. We’re watching this essentially day-to-day, week-to-week, to make sure it’s trending in the right direction. What I’m telling a lot of borrowers is there may be some ways where you can figure out through the Department of Education’s website what kind of [repayment] plan might work best for you and then you can ideally use the servicer’s website to go through all that.
Sometimes people will have very specific questions about their individual circumstance and often there’s a lot of jargon in different types of loans. People with mortgages sometimes don’t totally appreciate that people with student loans often have many loans. It’s not just one big loan. And sometimes each of them has different terms and conditions and rates. We count on the servicers to be able to answer questions about that.
As you look into how servicers are handling this restart of payments, are there other aspects of this process that you’re keeping an eye on?
The biggest issue we’ve seen over the past decade has actually been in steering people. What sometimes has been good for the servicer is to get someone off the phone as quickly as possible. They won’t walk you through what your options are. The other thing I’m pretty nervous about is whether these servicers are paying and training people appropriately. Many of them made business decisions to really cut a lot of their employees during the pandemic. Are they prepared with new employees to get them trained in giving accurate information?
Last summer, you said in regards to student loan issues: “I don’t think we’re close to getting this fixed.” Do you feel any closer this year?
A little bit. I think that we now have some new problems. Student loan interest rates for people entering school this fall are much higher than they were a few years ago. So we’re now in a situation where the total cost of those payments over time is going to be much bigger. We have to figure out: How are we going to set up a student loan system or set up a higher education system where student loans are just not the norm anymore? It used to be that student loans were small and rare, but it then turned into a monster.
What do you say to people who say: ‘I didn’t go to college. I don’t have student loans. Why should I care about this issue’?
Many people who graduate in a tough economy pretty quickly get overwhelmed financially. And if you don’t land a job, because of the macroeconomic environment, that can be a huge problem for your financial life. Right now, we have a generation of people who are not seeing some of the normal milestones, like buying a home, starting a family, and I think that raises real questions about growth and resiliency of the economy and the stability of our society.