Washington (Jul 13, 2021) – U.S. Senators Edward J. Markey (Massachusetts Democrat) and Elizabeth Warren (Massachusetts Democrat) wrote to President Biden describing the results of an investigation by lawmakers into preparing federal loan officers to resume student loan payments. and reiterating President Biden’s call to extend the current pandemic-driven pause in payments and interest to at least March 31, 2022.
“As the economy emerges from this unprecedented crisis, borrowers should not face an administrative and financial disaster as they begin to recover. We strongly recommend that you extend the pause in your interest and student loan payments to give you time to start repairing your broken student loan system. ” the legislators have written.
Last month, lawmakers sent letters to the CEOs of all federal student loan servants asking for information on the steps companies are taking to move the approximately 30 million federal student loan borrowers into repayment after the student loan repayment break ends in October 2021 and percent. The responses received by the senators and released today with a letter to President Biden show that neither student loan borrowers nor their service staff are ready to resume payments, and service organizations will take longer to make sure they have staff and procedures in place. to provide borrowers with the support they need.
One support staff summarized concerns, noting that “time is moving fast and there are less than three months left before the currently announced maturity date, and our concerns that we are better equipped to provide a smooth transition for FSA borrowers continue to grow.” …
Service responses showed that:
- The pause in payments made it much easier for borrowers. Nearly 2.5 million student loans were fully repaid during the disbursement gap, indicating that borrowers took advantage of the current zero interest rate to repay principal on their loans, according to figures provided by five lenders. Additional borrowers are eligible for forgiveness under the government service loan forgiveness program and participate in income-based repayment plans.
- Most borrowers had very little contact with their federal loan officer during the pandemic disbursement. Only one Student Loan Service Specialist provided information indicating that they have undertaken extensive and ongoing work to discuss available repayment options, including supporting borrowers through the complex and time-consuming process of enrolling in income-driven repayment plans. No other service provider reported similar coverage levels to support struggling borrowers, and service providers indicated that they are awaiting additional guidance from the Department of Education’s Federal Student Aid Office (FSA) before they can fully initiate outreach and communication with borrowers.
- Service providers will take longer to provide adequate staff to support borrowers.Five loan servants reported that they plan to hire additional customer service personnel to support borrowers in the transition to repayment. The recruitment, recruitment, training and oversight process for additional staff can take three to four months, with only 11 weeks left before the scheduled reopening.
- The transition of PHEAA borrowers to new service companies will take 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 difficulties for borrowers. The process of transferring PHEAA-managed borrowers’ accounts to other service personnel presents new opportunities for error that can exacerbate existing inaccuracies, preventing worthy government officials from claiming loan forgiveness.