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Employers can force out small 401(k) accounts once workers leave a job.
Most often, companies cash out balances less than $1,000, and roll those between $1,000 and $5,000 into an individual retirement account in the account holder’s name.
A recent law, Secure 2.0, raised that threshold to $7,000.

Tom Werner | Digitalvision | Getty Images

If you left behind a small 401(k) plan account at a former job, odds are your former employer has moved those funds out of the plan. That move may hurt your retirement savings over the long term, experts say.
Current law allows employers to “force out” 401(k) accounts of $5,000 or less if their owners leave the company, perhaps for another job or due to a layoff. The smallest balances, less than $1,000, can be cashed out while the rest can be rolled to an individual retirement account.

Employers don’t have to do this, experts say.
They can choose to keep small balances in the plan; however, most do not. To that point, 72% of 401(k) plans don’t keep balances of $5,000 or less once a worker leaves, according to a survey by the Plan Sponsor Council of America.
Just 7.5% of plans keep old accounts regardless of size, according to PSCA data.
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As more companies have chosen to automatically enroll new hires into their workplace 401(k), such plans have generally amassed more small accounts. Additionally, thousands of workers may have left behind small balances in the Covid-19 pandemic era. In 2022, a record number of workers quit their jobs during the “great resignation.”  

Companies typically cash out balances smaller than $1,000, meaning account holders get a check, less any income tax and tax penalties owed. Accounts between $1,000 and $5,000 are generally rolled over to an IRA.

Why companies often roll out small balances

A recent law, Secure 2.0, raised that upper limit from $5,000 to $7,000 in 2024. That means more small balances can be rolled out starting next year. However, that’s not automatic, as employers must update their plan rules accordingly.
Companies have an incentive to do so. For one, having many small balances can make plan administration more difficult, since companies must issue notices to a larger number of people.
Small balances can also lead to higher fees, said Ellen Lander, founder of Renaissance Benefit Advisors Group. Record keepers — the firms that track account holders’ savings, investments and other metrics — often charge based partly on a 401(k) plan’s average balance. A smaller average balance generally leads to higher fees, Lander said.

Investors should take action

However, there’s tension here. Investors may be better served keeping their money in the 401(k) plan.
If rolled over, 401(k) assets are often initially held in cash-like investments such as money market funds or certificates of deposit, until investors decide to invest those assets differently. There, they earn relatively little interest while also whittling away fees.
Additionally, those who get cashed out generally owe tax penalties if they are under age 59½. Their money is taken out of the tax-advantaged retirement system, denting their future retirement savings.

But there’s good news: Companies must issue notices to workers before forcing out a small balance. That means workers can take action before that happens.
Account holders “should do something” with those funds, Lander said.
“If a participant already has an IRA, the smartest thing would be to take that balance and roll it into an existing IRA or roll it into a new employer’s 401(k),” Lander added.Don’t miss these stories from CNBC PRO: More

There’s still time to reduce your tax bill or boost your refund for 2023, according to financial experts.
You can harvest portfolio losses, strategically take gains or donate directly to charity for a possible deduction.
But with the Dec. 31 deadline approaching, “time is of the essence,” said certified financial planner Edward Jastrem, chief planning officer at Heritage Financial Services.

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The year-end is quickly approaching, but there’s still a chance to reduce your 2023 tax bill or boost your refund with some last-minute moves, experts say.
Dec. 31 is the deadline for many tax-saving opportunities, which leaves limited time to take action.

“It’s a little late to be super strategic,” but there’s still some “low-hanging fruit” with certain tax strategies, said certified financial planner Edward Jastrem, chief planning officer at Heritage Financial Services in Westwood, Massachusetts.

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Here are a few last-minute tax moves to consider for 2023.

Reduce gains by harvesting bond losses

While the S&P 500 approached a record high on Dec. 28, investors may still have opportunities for tax-loss harvesting, which uses investment losses to offset profits.
“We have been selling off some bond funds at losses and purchasing either individual bonds with high yields or buying other funds in their place,” said certified financial planner Monica Dwyer, vice president of Harvest Financial Advisors in West Chester, Ohio.
“This doesn’t change the overall asset allocation but improves the tax performance,” Dwyer added.

However, you need to consider the so-called wash sale rule, which blocks the tax write-off if you repurchase a “substantially identical” asset within a 30-day window before or after the sale. 

Leverage tax-gain harvesting

Another move, so-called tax-gain harvesting, is selling profitable brokerage account assets while in the 0% long-term capital gains bracket.
Tax-gain harvesting is “an overlooked strategy,” said CFP Andrew Herzog, an associate wealth advisor at The Watchman Group in Plano, Texas.

You may qualify for the 0% rate for 2023 with taxable income of $44,625 or less for single filers and $89,250 or less for married couples filing jointly.
These rates apply to your “taxable income,” which is calculated by subtracting the greater of the standard or itemized deductions from your adjusted gross income.
You can also use tax-gain harvesting to sell profitable assets and then immediately repurchase to reset the basis, or original purchase price, to reduce future taxes, Herzog explained.
“But it’s very important to have an accurate estimate of income for the year to thread this needle,” he said.

Donate directly to a charity

With the year-end nearing, there’s limited time to make a 2023 charitable donation and claim the deduction, according to Jastrem.
There’s likely not enough time to open and send money to a donor-advised fund. But you could transfer assets directly to a charity from a bank account or brokerage account, assuming your institution can initiate the transfer and the charity can accept the funds by Dec. 31.
“Time is of the essence,” Jastrem said.
Of course, you can only claim a charitable tax break if you itemize deductions on your 2023 tax return. The vast majority of Americans claim the standard deduction, which is $27,700 for married couples filing jointly and $13,850 for single filers in 2023.Don’t miss these stories from CNBC PRO: More

Traders work on the floor of the New York Stock Exchange (NYSE) on the first day back since the Christmas holiday on December 26, 2023 in New York City. 
Spencer Platt | Getty Images News | Getty Images

In each of the past 16 Decembers I have selected and invested personally in 10 of the stocks we follow with the intention of holding for just one year.
These are companies that I find especially attractive in light of their valuations or their potential to benefit from economic developments. I hold an equal dollar amount in each of the positions for the following year, and then I reinvest in the new list.

This year’s list is perhaps a bit more defensive than in years past, as seen by the number of medical device companies, and has a focus on earnings growth.
Results have been good in some years and not as good in others. I will sell my 2023 names on Friday and buy the following names that afternoon.
I will sell my 2023 Top Ten List at year-end and purchase the 2024 Top Ten on Jan. 2 to be sold at the beginning of trading in 2025. The following is my Top Ten for 2024, listed in random order:
Donaldson
Founded in 1915, Donaldson is a global manufacturer of filtration systems and replacement parts for engines, industrial plants, power generation and various life sciences applications. The company has dominant market share in many of its businesses, which are diverse by geography and end-market and have attractive long-term secular growth potential.

Valmont Industries
Valmont Industries is a relatively small company ($4.7 billion market cap) that manufactures engineered poles, towers and other structures for a number of different applications, including roads and highway safety, utilities, telecommunications, and access systems for construction sites.
We view the company as an investment in infrastructure development that should benefit from the long-term global secular trends of population growth, urbanization and water scarcity.
Goldman Sachs
The company’s major business activities include debt and equity underwriting, M&A advisory, asset management, trading, lending and proprietary investing. The stock has been highly volatile over the past couple of years, due largely to an ill-conceived decision to more aggressively target the consumer lending market.

The rationale behind this decision was sound – consumer banking activities generally produce more dependable and recurring revenue streams, which are rewarded by investors in the form of higher valuations (trading multiples). However, management’s timing could not have been much worse, while execution was poor at best.
Danaher
Following the separation of its Environmental and Applied Solutions businesses on Sept. 30, Danaher has become a pure-play biotechnology, life sciences and diagnostics company. The company’s evolution to its current state occurred through a long series of acquisitions and divestitures designed to generate shareholder value through the application of the company’s proprietary set of operating processes and tools it refers to as the Danaher Business System, or “DBS.”
Amazon
Amazon excels in three areas where we see ample secular tail winds: cloud computing, e-commerce and digital advertising. Perhaps more importantly, each of these businesses has a wide economic moat.
PepsiCo
PepsiCo is a leading multinational snacking and beverage manufacturer that has seen a significant improvement in operational execution since CEO Ramon Laguarta took over in 2018. Laguarta has transformed Pepsi into a “faster, stronger, and better” company through several strategic initiatives: 1) reinvesting into the company’s brands via innovation and marketing; 2) addressing portfolio gaps in fast-growing categories where the company had been underpenetrated; and 3) enhancing the supply chain by increasing manufacturing capacity and introducing efficiencies through technological investments.
Disney
The Walt Disney Co. is one of the most prestigious brands in the world. Over the past century, the company has evolved from a small animation studio to a vertically integrated media and entertainment conglomerate. Disney has faced its fair share of challenges over the past couple of years, including a botched succession, an acceleration in cord-cutting and a slow recovery at the box office. Offsetting these challenges has been the resilient, and highly profitable, Parks & Resorts business which has benefited immensely from pent-up demand coming out of the pandemic.
Abbott Laboratories
Abbott Laboratories is a best-in-class Medical Device company that is diversified across four segments: Medical Devices, Diagnostics, Nutrition and Established Pharmaceuticals. The company has a compelling mix of existing products that are generating durable growth today, and new/upcoming product launches that will support future growth.
Johnson & Johnson
Johnson & Johnson is one of the world’s largest and most diversified healthcare companies. Following the recent Kenvue spinoff (consumer health business), JNJ’s revenue base now consists of 65% from the pharmaceutical segment and 35% from the medical technology segment (MedTech). The company is expected to continue benefiting from an aging global population and rising standards of living in emerging economies.
Microsoft
Microsoft is one of the largest technology companies in the world. It has successfully pivoted from a Windows PC-first world to the cloud and is leading the way in generative artificial intelligence. The company is a strategic partner in enterprise digital transformations through its cloud, app and infrastructure, and artificial intelligence offerings.
The reader should not assume that an investment in the securities identified was or will be profitable. These are not recommendations to buy or sell securities. There is risk of losing principal. Past performance is no indication of future results. If you are interested in any of these names, please call your financial advisor to discuss. More

Going from applicant to new hire can be a slow process.
Experts say taking these three steps may help you secure a new job more quickly.

Xavier Lorenzo | Moment | Getty Images

If you’re looking for a new job, get ready for more competition in the new year.
“We see many more job seekers come and use our site in mid- to late-January,” said Scott Dobroski, career trends expert at Indeed.

“It aligns to that new year, new you mentality,” he said.
While layoffs made headlines at the end of 2023, some companies are still looking to cut positions in 2024, according to a recent report from Challenger, Gray & Christmas, an outplacement and business and executive coaching firm.
The firm’s survey found 29% of companies had layoffs in 2023, with 21% indicating they may cut positions in 2024. Meanwhile, 46% of companies reported increased hiring in 2023, with plans to continue adding new employees in 2024.
If you’re looking for work, experts say there’s several steps you can take to help speed up your job search.

1. Leverage your network.

If you’re between jobs, take advantage of the ability to set your status to “looking for work” on professional networking sites, recommends Vicki Salemi, career expert at Monster.

New Year’s gatherings can be a great time to expand your professional contacts, she said.
As you’re adding new contacts, be sure to have an updated resume ready with your most recent professional successes. Your most recent performance reviews can be helpful for jogging your memory, she said.

2.  Use technology tools to boost your search.

With more competition for jobs in January, that may mean fewer positions will be available, according to Dobroski.
One way to get ahead of the competition is to use technology tools to help broaden your search.
By creating online profiles with your skills, experience and work you are seeking, you may find different positions that are a match.
Dobroski said he has seen bank tellers become sales executives after identifying transferable skills for those new roles. What’s more, the new salaries may be upwards of $30,000 or $35,000 more.
“Let the technology work for you,” Dobroski said. “You may find opportunities that you’re a fit for, but you otherwise wouldn’t have considered, both in and out of the industry that you’re in.”

3.  Pursue companies that prioritize hiring.

Some companies are prioritizing hiring more than others, according to data from Indeed.
“They’re making hiring efficient and effective,” Dobroski said.
That includes streamlined hiring processes with clear descriptions of open positions and transparent communication with job seekers, he said.
Indeed has put out a list of 15 companies currently hiring the fastest.
Here are the companies that made the list, according to the ranking.
1.      Signet Jewelers
2.      Mariano’s
3.      Cook Out Restaurants
4.      Comfort Keepers
5.      Holiday Inn Express and Suites
6.      Bath & Body Works
7.      The Goddard School
8.      Tesla
9.      Sevita
10.   Applebee’s
11.   Ross Dress for Less
12.   Hampton by Hilton
13.   Papa John’s
14.   Finish Line
15.   The Salvation Army More

A provision in Secure 2.0 allows money saved in a 529 college savings plan to be converted into a Roth individual retirement account tax-free after 15 years.
Up until now, the funds had to be used for qualified education expenses. Starting Jan. 1, the savings can also be put toward retirement.
That removes a “significant objection” to these college savings plans, says College Savings Foundation Chair Vivian Tsai.

Up until now, 529 savings plans were widely considered the best way to save for college. But there was always a major sticking point, according to financial experts and plan investors.
The funds had to be used for qualified education expenses such as tuition, fees, books and room and board. Even though the restrictions had loosened in recent years to include continuing education classes, apprenticeship programs and even student loan payments, any limitations on this future savings created “a mental barrier,” said College Savings Foundation Chair Vivian Tsai.

Starting in 2024 — thanks to “Secure 2.0,” a slew of measures affecting retirement savers — families can roll unused money from 529 plans over to Roth individual retirement accounts free of income tax or tax penalties.
“Most people’s objections are ‘what if I don’t use this money for education.’ Now you can use it for retirement,” Tsai said. “It removes a significant objection.”
“This is a big deal,” she added.

The benefits of a 529 college savings plan

These plans have been steadily gaining steam for several reasons.
In some states, you can get a tax deduction or credit for contributions. A few states also offer additional benefits, such as scholarships or matching grants, to their residents if they invest in their home state’s 529 plan.

Yet, total investments in 529 plans fell to $411 billion in 2022, down nearly 15% from $480 billion the year before, according to data from College Savings Plans Network, a network of state-administered college savings programs.
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“Last year, we saw a pretty noticeable reduction in contribution behavior,” said Chris Lynch, president of tuition financing at TIAA. Regular contributions to a 529 college savings plan took a back seat to paying more pressing bills or daily expenses, he said.
Further, many would-be college students started rethinking their plans altogether. Some are opting out entirely or considering a local and less expensive in-state public school or community college. 
Now, 529s offer more flexibility, even for those who never enroll in college, Lynch said.
“A point of resistance that potential participants have had is the limitation around, what happens if my kid gets a scholarship or decides they’re not going to college,” Lynch said.
In such cases, you could transfer the funds to another beneficiary, or withdraw them and pay taxes and a penalty on the earnings. If your student wins a scholarship, you can typically withdraw up to the amount of the scholarship penalty-free.
However, the added benefit of being able to convert any leftover funds into a Roth IRA tax-free after 15 years, up to a limit of $35,000, “helps to eliminate that point of resistance,” he said.

“It becomes a no-brainer at this point,” said Marshall Nelson, wealth advisor at Crewe Advisors in Salt Lake City, Utah.
There are still some limitations. The 529 account must have been open for 15 years and account holders can’t roll over contributions made in the last five years. Rollovers are subject to the annual Roth IRA contribution limit, and there’s a $35,000 lifetime cap on 529-to-Roth transfers.
Still, “we’re going to see a spike in 529 usage,” Nelson predicted.
Even if someone in their mid-20s put $35,000 in a Roth IRA and just left it alone, that could be close to $1 million 40 years down the road, he said.
“It’s something I see catching on,” Nelson added. “Now they have the option to use that money to supplement retirement. That’s a huge win.”Don’t miss these stories from CNBC PRO: More

The Inflation Reduction Act offers a tax credit worth up to $7,500 to those who buy new electric vehicles. It also offers a $4,000 credit for used EVs.
New rules for 2024 will allow buyers to get the EV tax credit at the point of sale, rather than waiting for tax season. Unlike current rules, consumers won’t need to have a tax liability to get it.
However, fewer new EVs will likely qualify for a tax break starting Jan. 1 due to car manufacturing requirements.

Praetorianphoto | E+ | Getty Images

The $7,500 tax credit for new electric vehicles will be easier for many consumers to claim in 2024, but it may be more difficult for others. These opposing dynamics are due to federal policies taking effect at the same time.
One policy kicking in Jan. 1 will allow car dealers to give buyers their EV tax break at the point of sale — as cash, a price discount or down payment. Currently, consumers must wait until they file an annual tax return during tax season to receive a financial benefit.

Under the new mechanism, consumers would essentially “transfer” their federal tax credit to the car dealer. In turn, the dealer would pass on that tax break to consumers. This will be available for both new and used EVs, the respective credits of which are worth up to $7,500 or $4,000.

Further, consumers would be eligible for the tax break regardless of their tax burden, which isn’t the case now. Currently, since the tax credit is nonrefundable, buyers only qualify for any of the credit if they have a federal tax liability — a policy that tends to dilute the benefit for households with relatively low incomes or exclude some entirely.
These new policies will make the tax credit both easier to claim and more accessible starting in 2024, while making EVs cheaper for consumers, said Ingrid Malmgren, policy director at Plug In America.

Why claiming a $7,500 EV tax credit may be tougher

Meanwhile, consumers who want a tax break will likely have fewer cars to choose from next year.
The Inflation Reduction Act, which President Joe Biden signed into law in 2022, phases in certain manufacturing requirements aimed at enhancing domestic EV supply chains.

In the short term, however, they disqualify some EVs from being eligible for a full or partial tax credit as carmakers work to comply with the rules. These rules only apply to purchases of new EVs, not used models or leases.
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In 2024, EVs whose battery components are built or assembled by a “foreign entity of concern” — China, Iran, North Korea and Russia — don’t qualify for a tax credit, Malmgren explained.
“Right now, China is a big supplier,” Malmgren said.
As a result, “the expectation is there will be fewer cars available Jan. 1,” she said. “And sadly, they’re the more affordable ones.”
The U.S. Department of Energy has a list of new and used EVs eligible for a full or partial tax credit.

There are some caveats

There are few things to consider for consumers hoping to get a point-of-sale discount.
For one, not all dealers will necessarily participate, though most are expected to. Consumers should ask their dealer before buying, experts said.
Buyers must also file an income tax return for the year in which they transfer their EV tax credit to a dealer.
Further, the EV tax credit carries some eligibility requirements for cars and consumers. One is based on household income, and rules vary for new and used EVs.

For example, married couples who file a joint tax return are only eligible for a new EV tax credit in 2024 if their annual income is $300,000 or less in either 2023 or 2024. For used EVs, the income threshold is $150,000 for married couples.
But car dealers won’t analyze consumers’ income to determine if they qualify. Buyers must self-attest their eligibility — and making a mistake could mean paying back the credit’s full value to the IRS at tax time.Don’t miss these stories from CNBC PRO: More

If you have a flexible spending account, you may be running up against a Dec. 31 deadline to use your 2023 funds.
Experts say it’s a good time to assess your FSA’s rules and make a plan to make the most of any unused money you have set aside toward medical expenses.

Tom Werner | Digitalvision | Getty Images

As the calendar turns to a new year, you may be at risk for losing money if you have a flexible spending account.
Many FSA owners have a Dec. 31 use-it-or-lose-it deadline to use the funds they have set aside for the year.

The average forfeit of funds last year from an FSA was $300, according to Rachel Rouleau, chief compliance officer at FSA Store. Of course, some account holders lost even higher sums.
Flexible spending accounts are accounts that may be provided alongside an employer health plan and used to pay for eligible out-of-pocket medical costs. The money contributed to an FSA is not subject to federal income taxes.
In 2024, employees are able to put up to $3,200 in an FSA, up from $3,050 in 2023.

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Even for those account holders who may have had to forfeit several hundred dollars at the end of last year, the tax advantages still make the accounts worthwhile, according to Rouleau.
For example, if you set aside $2,000 in your FSA and save 30% on taxes, that amounts to $600.

“Even if you lose $300, you still made the right decision,” Rouleau said.
Ideally, every dollar set aside in an FSA should be used toward eligible health-care expenses.
The good news is “there are thousands of ways for people to avoid losing those pre-tax dollars,” Rouleau said.
If you’re unsure where to start, these three tips can help.

1.  Find out the rules for your unused FSA balance.

Your employer may not necessarily require you to use all of your FSA funds by Dec. 31.
“It’s important for the employee, if they have an FSA, and they’re running up against the deadline to know, do they have to use it before the deadline runs out?” said Lawrence Sprung, a certified financial planner and founder of Mitlin Financial in Hauppauge, New York.
You may have the option to carry over unused funds into the next year. Up to $610 may be carried over into 2024, per IRS rules. Funds above that amount may be lost.
Alternatively, your FSA plan may offer a grace period until March 15 to spend down your 2023 FSA funds.
Or you may have a runout period, or several months after the end of the last plan year to submit receipts for qualified expenses that were incurred in 2023.
To find out the specific rules that apply to your account, you may contact your FSA administrator, which typically lists their contact information on an FSA debit card. Your human resources department may also be able to provide that information.

2. Create a strategy to use your balance.

Though time may be running out, there are still plenty of ways to use your FSA money before the Dec. 31 deadline.
If you have a bigger balance, you may want to pursue bigger ticket items like eye exams, glasses and contact lenses or dental work, suggested Sprung, who is also the author of the book “Financial Planning Made Personal.”
It’s also a good time to pay for any outstanding medical bills that were incurred during the year, Rouleau noted.

The funds can also be used for routine care items such as over-the-counter medicines like pain relievers or allergy medicines, as well as sunscreen, acne care and other routine care products, she noted.
Purchases made on FSA Store’s website up until midnight on Dec. 31 may qualify toward your 2023 balance.

3. Start planning for next year’s FSA funds.

When working with families to plan for FSA spending, “the first year is the hardest,” Sprung said.
If you have not been keeping track of your out-of-pocket medical expenses, it can be tough to gauge, he said.
Sprung typically advises families to estimate how much they may spend, and perhaps cut that total back a bit.
In following years, once you have FSA receipts or card transactions, that may make it easier to estimate how much money you and your family may need, Sprung said.
If you’re carrying an FSA balance into 2024, it may be a sign you may want to contribute less when it comes time to elect your deferrals next year, he said.
“[If] you think that next year is going to be a similar year, then you certainly want to use that as a gauge and start cutting back,” Sprung said.
Keep in mind that life changes, such as the birth of children or a divorce, may also affect how much you need to set aside in your FSA, he said.
Importantly, flexible spending accounts are fully funded on the first day of the plan year. As such, you may plan to start using next year’s funds earlier to avoid running up against next year’s December deadline.
Keep in mind that if you leave your job at any point during the year, either voluntarily or involuntarily, you may lose access to your balance, unless you are allowed COBRA continuation for your FSA, Sprung noted. However, you may still have 60 to 90 days to submit receipts. More

Just 60% of student loan borrowers made a payment when the bills resumed in October.
“This is, in essence, a massive student debt strike,” one activist said.

Student loan forgiveness advocates rally outside the U.S. Supreme Court building in Washington, D.C., after the nation’s high court struck down President Joe Biden’s student debt relief program, June 30, 2023.
Kent Nishimura | Los Angeles Times | Getty Images

Nearly a year before federal student loan payments restarted, the U.S. Department of Education warned that many borrowers could struggle to pay their bills again.
“Unless the [Education] Department is allowed to provide debt relief, we anticipate there could be an historically large increase in the amount of federal student loan delinquency and defaults as a result of the COVID-19 pandemic,” Education Department Undersecretary James Kvaal said in a court filing.

The Supreme Court in June blocked President Joe Biden’s plan to cancel up to $20,000 in student debt per borrower — and those warnings are now becoming real. To that point: just 60% of people with federal education loans, with payments due in October, paid their bill by mid-November, U.S. Department of Education data published this month shows.
Outstanding student loan debt in the U.S. now exceeds $1.7 trillion, burdening Americans more than credit card or auto loan debt.
The average loan balance at graduation has tripled since the 1990s to $30,000 from $10,000. Additionally, some 7% of student loan borrowers are now more than $100,000 in debt.
Here’s what experts have to say about the new findings.

‘A massive student debt strike’

The fact that up to 40% of borrowers didn’t make a payment “reflects exactly what we’ve been warning would happen should Biden turn the debt collection apparatus back on,” said Astra Taylor, co-founder of the Debt Collective, a union for debtors.

“Faced with the impossible choice of feeding their kids, keeping a roof over their head or throwing an average of $400 a month into the Department of Education incinerator, borrowers are rightly choosing to keep themselves and their families financially afloat,” Taylor said.

Astra Taylor
Courtesy: Astra Taylor

“This is, in essence, a massive student debt strike,” she added.
The Debt Collective has recently created a petition in which borrowers can write to the U.S. Department of Education and request that it cancel their student debt. So far, more than 35,000 people have done so, the organization says.

‘Unfortunately unsurprising’

The repayment problems for borrowers are “unfortunately unsurprising,” said Persis Yu, deputy executive director at the Student Borrower Protection Center.
“Neither borrowers nor the student loan system were prepared to resume repayment,” Yu said.
Even before the pandemic, when the U.S. economy was in one of its healthiest periods in history, nearly half of student loan borrowers were behind on their payments or enrolled in relief measures for those struggling, including deferments or forbearances, according to an analysis by higher education expert Mark Kantrowitz.
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Meanwhile, Yu said, “servicers are overwhelmed and are failing to help struggling borrowers navigate the options that are available to them.”
Indeed, many borrowers describe challenges trying to get current on their student loans, with long wait times trying to reach their servicers, errors with their bills, lost account information and confusion over new options rolled out over the past three years.
Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, a nonprofit in New York, said she’s never seen this kind of chaos in the student loan space before.
“Servicers are having a very hard time getting people back into repayment,” Rodriguez said.
Yu pointed out that Biden’s plan to cancel student debt was designed to alleviate borrower hardship, and she blamed the legal challenges to the president’s relief and the Supreme Court’s decision for the current situation.
“What we see happening is the natural consequence of the right wing’s effort to kill debt relief,” Yu said.

‘Borrowers just not realizing payments have come due’

Meanwhile, other financial experts say the transition back to repayment after more than three years was bound to be difficult.
“I attribute some of it to some borrowers just not realizing payments have come due,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit.
Meanwhile, others may be taking advantage of the Biden administration’s 12-month “on-ramp” to repayment, during which they’re shielded from the worst consequences of falling behind, experts say.

But Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers, said he is worried that some student loan holders were confusing that relief for another extension of the payment pause. (The stay on bills was extended eight times.)
“There is a fundamental difference here,” Buchanan said. “Interest is accruing now.”
Throughout the payment pause, which went into effect in March 2020, the interest rates on most federal student loans were set to zero. But interest began accruing again on Sept. 1.
As a result, borrowers who don’t make payments now will see their balances grow.
Still, Buchanan said he also wasn’t surprised by the large share of borrowers who haven’t made a payment yet. He said it was usually a trying process to get people back into repayment after long breaks from their bills.
“It will likely be early 2024 before things normalize,” Buchanan said.
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