Washington (July 13, 2021) - United States Senators Edward J. Markey (D-Mass.) and Elizabeth
Warren (D-Mass.) sent a letter to President Biden sharing the results of the
lawmakers’ inquiry into federal loan servicers’ preparations for the resumption
of student loan payments and reiterating the call for President Biden to extend
the current pandemic-induced pause on payments and interest until at least
March 31, 2022.
“As the economy recovers
from this unprecedented crisis, borrowers should not be faced with an
administrative and financial catastrophe just as they are beginning to regain
their footing. We strongly urge you to extend the pause on student loan
interest and payments in order to allow time to begin to repair the broken
student loan system,” the lawmakers wrote.
A copy of our letter can be found HERE.
A copy of the servicer responses can be found HERE.
Last month, the lawmakers sent letters to the CEOs of all federal
student loan servicers requesting information about the steps the companies are
taking to transition approximately 30 million federal student loan borrowers
back into repayments once the pause on student loan payments and interest ends
in October 2021. The responses received by the senators - and released today
along with the letter to President Biden - indicate that neither student loan
borrowers nor student loan servicers are prepared for payments to resume, and
servicers will need more time to ensure that they have staff and procedures in
place to provide borrowers with the support that will be needed.
One servicer summarized the concerns, noting that “time is quickly
passing and with less than three months now until the currently stated restart
of repayment date, our concerns over being best prepared to provide a smooth
transition for FSA borrowers continues to grow.”
The responses from servicers revealed that:
payment pause has provided significant relief to borrowers. According
to data provided by five loan servicers, nearly 2.5 million student loans
have been fully repaid during the payment pause, suggesting borrowers have
taken advantage of the current zero percent interest rate to pay down the
principal balance owed on their loans. Additional borrowers have qualified
for forgiveness under the Public Service Loan Forgiveness program and
enrolled in income-driven repayment plans.
borrowers have had very little contact with their federal loan servicer
during the pandemic payment pause. Only
one student loan servicer provided information indicating that they have
conducted extensive and ongoing outreach to discuss affordable repayment
options, including supporting borrowers through the complex and
time-consuming enrollment process for income-driven repayment plans. None
of the other servicers reported similar levels of outreach to support
struggling borrowers, and servicers indicated that they were waiting on
additional guidance from the Education Department’s office of Federal
Student Aid (FSA) before they could fully begin outreach and communication
will need more time to ensure that staffing is adequate to support
borrowers.Five loan servicers reported
that they plan to hire additional customer service staff to support
borrowers in the transition to repayment. The process of recruiting,
hiring, training, and supervising additional staff may take three to four
months and the scheduled resumption of payments is only 11 weeks away.
PHEAA borrowers to new servicers will require additional time to ensure
that borrowers are not harmed. PHEAA’s
recent announcement that it will not seek an extension of its federal loan
servicing contract creates additional complexity for borrowers. The
process of transferring borrower accounts managed by PHEAA to another
servicer introduces new possibilities for errors, which could compound
existing inaccuracies, preventing deserving public servants from
qualifying for loan forgiveness.