A millennial got $76,000 in student debt wiped out last year. Now he's learned it was a mistake and has to dig into his retirement savings to afford payments again.
David's $76,000 student-debt balance was wiped out last year.
But in late February, his servicer MOHELA told him the relief was a mistake.
He's one of a number of borrowers who are seeing their student-debt relief reinstated due to their servicer's error.
When David, 38, saw that his total student-loan balance was wiped out last August, he immediately felt a financial weight lifted off his shoulders.
"You have satisfied your obligation and no additional payments are required on these loans," the letter from his servicer MOHELA, reviewed by Business Insider, stated.
David — who requested his last name be withheld for privacy — saw no reason to question an official letter from his servicer, and he said it could not have come at a better time, given his husband had just been furloughed from his job.
"We sort of took this huge sigh of relief because that was $1,600 a month that could go elsewhere," David said. "So I mean, we upped our retirement contributions, put more in our savings account because we're saving to buy an apartment."
That whole outlook changed at the end of February when David received a notice from MOHELA informing him that his loans were not, in fact, forgiven, and he would soon have to resume payments on his nearly $76,000 balance once again.
According to the letter from MOHELA, reviewed by BI, the company applied the incorrect end date to the periods during which David was working for a qualifying employer for relief through the Public Service Loan Forgiveness program, which forgives student debt for government and nonprofit workers after 10 years of qualifying payments.
"We sincerely apologize for any confusion these errors may have caused," MOHELA said in its letter.
David is not the only borrower to face this error. BI has previously spoken to two other borrowers who found themselves in the same position, now having to readjust their finances to account for another monthly payment after they thought their loans were forgiven.
MOHELA did not respond to a request for comment from BI on these errors, and an Education Department spokesperson previously told BI that "the Department will not stand for egregious servicer errors that have harmed borrowers and perpetuated problems in the broken student loan system." The department has not yet provided an update on the errors themselves.
According to David's account, he's expected to resume payments in April, and while he's not yet sure what the amount will be, he's already having to cut back on spending and dig into his retirement savings to make sure he can afford an additional bill.
"We've pre-booked some vacations this year that we're now trying to figure out how to get out of, my father passed away a couple of years ago and so I'm helping to support my mother and my sister, and so that all is now in question," David said. "Really, it's sort of square one for the budget."
'I don't know how this is going to impact me long-term'
David is still lacking clarity as to how many more payments he needs to fulfill before receiving loan forgiveness through PSLF. He said that while he's tried to contact customer service at MOHELA, he has been unable to get through due to the hourslong hold times.
"I don't even know how this is going to impact me long-term because I don't know what my payment count actually is," David said.
Since federal student-loan payments resumed in October after an over three-year pause, many borrowers have been struggling to get help from their servicers due to strained resources at Federal Student Aid, the office that oversees repayment. The Education Department has previously vowed to ensure servicers are fulfilling their contractual obligations through an accountability framework, and Biden's budget request included a funding boost for the agency.
Still, it's unlikely Biden's budget will be passed in its current form due to the Republican majority in the House — meaning the customer service challenges borrowers face could continue. BI previously spoke to Anne, a mom who was told that her $192,000 student-loan forgiveness was a mistake. She hasn't been able to receive clarity on the issue from MOHELA, and she now has to reshape her whole budget to account for her own and her children's expenses.
"My kids were going to do summer camp. I was going to study for the bar exam. So I might have to put that off because I don't think I'll have money to pay for the course," she said. "I'm very upset. I'm not going to be able to buy a new car. My whole world has been flipped over in a matter of a week."
As David waits for clarity, he's evaluating how much money he can withdraw from his savings account to face his student-loan payments once again.
"I'm on the fortunate end of this in that I do actually have a savings account," David said. "I'm still in public service. I just can't imagine all those other people who are not. It's devastating."
Read the original article on Business Insider
