Many student loan borrowers were informed that their debts, ranging from tens to hundreds of thousands of dollars, would be completely forgiven, only to later discover that they are still responsible for making the payments.
Anne, a woman who shared her story with Business Insider this week, recounted her experiences.
The woman, aged 46, received news that her debt balance of almost $200,000 would be eliminated, thanks to President Biden’s student debt forgiveness plan for public service workers.
Anne diligently made her monthly payments since 2010 under the Public Service Loan Forgiveness program. After 10 years of consistent payments, she was overjoyed to have her entire debt completely wiped away.
“I couldn’t believe it,” Anne shared with Business Insider. “I kept repeating to myself, ‘This can’t be happening. I genuinely can’t fathom that this is real.’ Tears welled up in my eyes as it all sank in. It felt like a victory, like I had made the right choice.”
With her debt now successfully wiped clean, Anne could finally begin focusing on saving for her retirement.
Anne expressed that she had neglected her own future, but with a sense of relief, she was able to focus more on retirement planning. Additionally, she began making arrangements for her children’s education as well.
Months later, a devastating letter from MOHELA, her student loan servicer, landed on her doorstep. The contents of the letter were nothing short of alarming: her loan had been deemed a mistake, and she was now expected to repay a staggering $192,000.
“We acknowledge that you are currently enrolled in the PSLF Program. However, you have not yet completed the necessary 120 qualifying payments for loan forgiveness,” stated MOHELA in a letter reported by Business Insider. “We have rectified and updated your account as outlined below. We deeply apologize for any confusion caused by these discrepancies.”
The letter also mentioned that the end date of Anne’s employment history in her loan application was incorrect, causing the number of qualifying payments she had reported to be changed.
Anne is currently uncertain about which areas of her budget she can trim in order to cover the accumulated sum of $192,000 in outstanding payments.
Anne expressed her disappointment as she shared, “My kids were all set to go for summer camp, and I was planning to dedicate my time to studying for the bar exam. However, it seems like I might have to postpone that now because I don’t have enough funds to cover the course fees. This situation has left me feeling really upset. On top of that, I won’t be able to afford a new car either. It’s incredible how my entire world has been turned upside down within just a week.”
Unfortunately, Anne’s experience is not an isolated case. Numerous borrowers have also shared similar stories, where MOHELA or other loan servicers have mistakenly informed them that their student loan forgiveness was approved.
“It’s just so confusing. Borrowers weren’t given any notice. I personally had no idea that this could happen,” Anne expressed. “For the past eight months, I’ve been living my life, but if I had known, I would have made different choices.”
According to Alex Beene, the financial literacy instructor for the state of Tennessee, we can expect to witness an increase in errors similar to this one as more opportunities for loan forgiveness are introduced at both the federal and state levels.
A few months ago, President Joe Biden made a significant announcement. He revealed that 74,000 borrowers would have the opportunity to have their student debt completely forgiven. To facilitate this, the Education Department allocated an additional $5 billion. This forgiveness was specifically designed for 44,000 public employees and tens of thousands of borrowers who diligently made payments for at least 20 years on income-driven repayment plans.
“Loan providers may have software that is prone to errors, and once they become aware of it, they will certainly take steps to rectify the situation in order to recover any outstanding amounts,” Beene explained to Newsweek.
According to him, if you happen to receive a letter stating that all your debt has been forgiven, it would be wise to carefully review the details before jumping to any conclusions.
“It’s important for borrowers to proactively communicate with their loan provider when forgiveness is granted to ensure compliance with all the terms,” advised Beene. “This not only helps you avoid future payments, but also prevents the emotional distress that often accompanies such situations.”
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