The restart of federal student loan payments is turning into a headache for many borrowers.

For months, consumer advocates and lawmakers warned the system for processing payments was ill-equipped to handle an estimated 28 million borrowers restarting payments all at once this October. And now, those predictions are ringing true, with reports of frozen logins, erroneous bills, and long wait times to speak to a customer-service representative.

“It’s a complete mess,” said Blake Morgan, a borrower in Kansas City, Missouri, who has $172,000 in federal student loans. “It’s just so hard to get ahold of a person right now.”

Borrowers will be shielded from the harshest consequences of a missed payment over the next year. Still, logistical hurdles and widespread confusion are adding to the anxiety of millions of Americans as they prepare for the monthly hit to their budgets in the aftermath of President Joe Biden’s failed plan to cancel up to $400 billion in student debt.

A lot of borrowers aren’t yet prepared to make payments due to financial hardships, said Yemi Rose, chief executive at Ofcolor Inc., a financial platform catering to employees of color.

“These are folks who've gone through quite a bit of time without having to make a student loan payment,” he said. “And a very small fraction feel prepared to do so.”

Sudden Restart
The Consumer Financial Protection Bureau said it is closely monitoring the situation after receiving complaints regarding wait times and delayed processing of documents, including applications for income-driven repayment plans. 

Morgan said he spent hours on hold with his loan servicer Nelnet Inc., his loan servicer, multiple times in a failed attempt to report a loss of income, relevant to his IDR.

Servicers including Nelnet, EdFinancial Services and Mohela—which manage student debt on behalf of the Department of Education—say they are adding workers and have notices on their websites regarding high call volumes. But borrowers are growing frustrated with the industry, long criticized for miscommunication, bad record keeping, misallocation of payments and confusing loan transfers.

A number of loan servicers ended their relationship with the Department of Education during the federal payment pause, including Navient Corp., which settled allegations of predatory lending for $1.85 billion in January 2022. But that means four in 10 borrowers now have a different servicer than the one they had prior to the pause, which began with the outbreak of the coronavirus.

Among those with a new loan servicer is Miranda Bovit, a 28-year-old attorney in Philadelphia.

Nelnet now manages the $81,000 in federal student debt she has from her undergraduate and law degrees. But, she says she’s had difficulty logging in and that her account keeps showing a different amount due. A monthly bill of almost $600 last week now says it will be $900, which is affecting her ability to budget.

“When you log in, the website will just freeze,” she said. “It’s frustrating when things are bouncing around.”

Forgiveness Confusion
The Department of Education—which is urging Congress to fund a budget increase for the Office of Federal Student Aid—told Bloomberg it is working closely with loan servicers to ensure borrowers are getting the information they need—and will hold servicers accountable when they don’t. Nelnet deferred comment to the Office of Federal Student Aid, citing its status as a DOE contractor.

In the meantime, there’s widespread confusion, especially around Biden’s recent overhaul of federal student loan forgiveness plans. The new program, Saving for a Valuable Education, or Save for short, is designed to reduce borrowers’  monthly bills based on income and provide a pathway to forgiveness after a certain number of years. But it appears to be creating issues for those attempting to use the separate Public Service Loan Forgiveness plan, which is available to those working in government and qualifying nonprofits.

Waqar Vick Rehman in Philadelphia, for instance, said he just received a notice that he’s been placed in administrative forbearance for another two months—but he says he didn’t ask for that.

The 40-year-old lawyer has about $210,000 in federal loans and applied for the PSLF program since he works as a public defender. But right now his account with Mohela—which services PSLF loans—shows he owes about $275 next month through Save. He’s not sure if he will need to pay that amount or if missing the payment will jeopardize his PSLF enrollment.

Likewise, Ashlee Smith, a ER nurse in Tampa, Florida, said she’s applied for PSLF, but that she recently had her loans transferred to Mohela with a note appearing to have forgiven her $31,000 loan. She’s doubtful that’s true, given she’s only made about eight years of payments. But she’s having trouble finding out what’s going on.

“I can't get anyone on the phone,” she said. “It’s really frustrating. Why didn’t they prepare more for this?”

This article was provided by Bloomberg News.