Tucked away in Governor Kathy Hochul’s voluminous 2022-23 executive budget, her first as the State’s chief executive officer, is a line item on page 538 establishing funding for the “operation of education debt consumer assistance programs.”
For some this amount of funding — $3 million annually – may seem like small potatoes in a $214 billion state budget. But it is a life preserver for many New Yorkers whose student loan debt holds them back from fully participating in the state’s economy, saving for retirement, purchasing a home and building wealth.
By appropriating this funding, Governor Hochul is acknowledging that the state needs to do more to support borrowers struggling with student loan debt. Why? Because the loan servicing sector has a documented history of disseminating incomplete and erroneous information to borrowers, resulting in missed opportunities for reducing or eliminating debt. Indeed, a 2019 USDOE Inspector General report found that loan servicers were failing to inform borrowers of all their repayment options and miscalculating payments for individuals enrolled in income-driven repayment plans, among other deceptive business practices.
Increased Demand for Help with Student Debt
Action by the governor on student loan debt could not come at a more critical time. The current moratorium on federal student loan repayments, implemented due to the pandemic, will expire on May 1, 2022. President Biden has made clear that no more “pauses” on payments and interest are forthcoming. The resumption of student loan payments is certain to trigger an increased demand for help as borrowers continue to struggle with COVID-related pressures on their income.
Borrowers are also bracing for changes in the roster of companies servicing loans. FedLoan, one of the largest companies managing federal student loans, will exit the federal loan servicing business in 2022. Navient, another large servicer, stopped servicing federal “direct” student loans last fall. These changes will certainly result in confusion and financial problems for loan holders as their accounts are transferred to other companies.
The federal Public Service Loan Forgiveness (PSFL) program, which has been plagued by loan servicer misconduct and criticized for its high rejection rate of PSFL applications, recently underwent changes to ensure more borrowers receive the relief promised for pursuing careers in public service. However, loan holders only have until October 31, 2022, to take the steps necessary to receive relief under new program modifications. Tens of thousands of New York’s public servants could see their debt eliminated under this program. It is critical that we make sure all the relief available to consumers is realized and borrowers can take advantage of it. But if they cannot navigate the system, they cannot benefit.
Older Adults, Low-income and Black Women most financially burdened by Student Debt
Student loan debt impacts borrowers of all backgrounds, in both urban and rural communities. But it has been especially onerous for low-income borrowers, first generation college students, older adults and women, particularly Black women. After California ($147.2 billion) and Texas ($114 billion), New York has the highest outstanding student loan debt, at nearly $99 billion. For the state’s 2.4 million borrowers the average debt load is $41,429. And of those 2.4 million borrowers, 279,433 are in delinquency, which means they missed loan payments and are at risk of defaulting on their loans.
Many older borrowers fear they will never pay off their debt. Edward Smith, 71, put himself in that category. He has more than $64,000 in student loan debt based on loans he took out to earn undergraduate and graduate degrees in the social sciences. Until 2019 he was working as a social worker for a Bronx-based nonprofit, helping clients with addictions access benefits and treatment programs. Prior to that he spent 12 years with the NYC Department of Education.
After defaulting on his loan a few years ago, Mr. Smith said the federal government began offsetting his wages and upon retirement, his Social Security income. “It affected my whole lifestyle,” said the Harlem resident, who currently lives in transitional housing. “I came to the realization that I have to live with this, because in my mind, there was no way I could alleviate that amount of debt monetarily.”
Fortunately, a friend told Mr. Smith about EDCAP, an education debt consumer assistance program my organization created in 2019, with support from the State Legislature, to assist both federal and private borrowers manage their debt. EDCAP is a one-stop shop for student loan debt, providing free, unbiased one-on-one consumer assistance and case management. Mr. Smith met with an EDCAP counselor who consolidated his loans and helped enroll him in an income-driven repayment plan. His loans are now in good standing and EDCAP is exploring his eligibility for loan forgiveness programs. “If it were not for this program I would be in dire straits,” said Smith.
Thanks to new funding from Governor Hochul, and ongoing support from the State Legislature, we will expand EDCAP services statewide to help more New Yorkers like Mr. Smith get the help they need to effectively manage and when possible, eliminate their debt.
David R. Jones, Esq., is President and CEO of the Community Service Society of New York (CSS), the leading voice on behalf of low-income New Yorkers for more than 175 years. The views expressed in this column are solely those of the writer. The Urban Agenda is available on CSS’s website: www.cssny.org.