At Hearing, Warren Pushes for Borrower Protections After Major Student Loan Servicing Shakeup, Calls on President Biden to Extend Loan Payment Pause
Warren: "Nearly nine million borrowers will need to be transferred to a new servicer in just a few months. This is no easy task, and the Administration has an important job to do to make sure that this transition happens smoothly."
"It is critical that the Administration extend the payment pause, which is currently set to expire on September 30."
Washington, D.C. - Today, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy, United States Senator Elizabeth Warren (D-Mass.) delivered remarks on the importance of ensuring accountability for student loan servicers following the major student loan servicer shakeup, and extending the pause in student loan payments, collections, and interest that is is scheduled to end on September 30, 2021. This hearing is a follow-up to Senator Warren's Subcommittee hearing in April 2021, which focused on the student loan debt crisis.
Earlier today, Senator Warren, Senate Majority Leader Chuck Schumer (D-N.Y.), and Representative Ayanna Pressley (D-Mass.) held a press conference calling on President Biden to extend the pause on student loan payments and to cancel up to $50,000 of student loan debt.
Watch the live hearing HERE.
Transcript: Protecting Student Loan Borrowers and the Economy in
U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy
Opening Statement from U.S. Senator Elizabeth Warren
Tuesday, July 27, 2021
Senator Elizabeth Warren: So welcome to the second Economic Policy Subcommittee hearing on the student loan crisis. When we held our first hearing on this subject, in April, I emphasized that the economic crisis caused by the pandemic, and the pause on student loan payments increased the urgency to fix the program and to provide relief to millions of borrowers.
Three months later, the student loan program is at a crossroads – and we should take advantage of the opportunity to make real change.
The pause on student loan payments, interest, and collections that was put in place at the beginning of the pandemic is set to expire in about two months. This pause has shown how important it is to eliminate student debt. For some borrowers the pause meant that they didn’t have to choose between food, rent, and paying student loan debt. For millions more, the pause gave them a chance to pay off other debt, or even to put some savings aside. This was good for borrowers, and good for our economy. Now the President should make these benefits permanent by using his authority to forgive $50,000 in student loan debt for all borrowers.
In the meantime, it is critical that the administration extend the payment pause, which is currently set to expire on September 30. Earlier this month, I released the results of an investigation that found that student loan servicers were not ready for this pause to end. They need more time to connect with borrowers, and more time to staff up to handle the needs of borrowers during the transition – and they are still waiting on important guidance from the Biden administration.
Now there is a new set of complications that will take time to unravel. Two weeks ago, PHEAA, a large student loan servicer that has badly mismanaged the Public Service Loan Forgiveness Program (PSLF), announced that they will be leaving the Federal Student Loan Program.
This is good news. Very good news. PHEAA was responsible for failures in the PSLF program that have robbed untold numbers of borrowers of the debt cancellation that they were promised. The company has a nasty record of ripping off borrowers – since 2016 nine different Department reviews have uncovered problems with PHEAA’s implementation of the program – PHEAA’s problems were so extensive, that they have been subject to four corrective action plans and two large fines.
Despite the company’s problems, when the company’s CEO, James Steeley, appeared at our April hearing on student loans, he told what appeared to be a bald-faced lie about PHEAA’s loan servicing record – he insisted that PHEAA had never been subject to Department penalties. This was absolutely not true. When we learned about the actions taken by the Department of Education against PHEAA, Senator Kennedy and I sent a letter to Mr. Steeley asking that he clarify the record, his response – which I am releasing today – is a mix of backsliding and denial that raises more questions than it answers. Senator Kennedy and I are from different parties and we often hold different views, but we both believe in accountability. When a corporate CEO comes before our committee to testify, we expect that person to be reasonably accurate and if they make a mistake, to correct it as quickly as possible. Our job is oversight, and in this context it means that we have a responsibility to respond to misinformation and outright lies. And to demand accountability for anyone who provides false and misleading testimony to Congress.
As PHEAA leaves the student loan program, that’s not the only problem we need to confront. Nearly nine million borrowers will need to be transferred to a new servicer within a few months. This is no easy task, and the administration has an important job to do to make sure that this transition happens smoothly. But this is also a rare opportunity for a fresh start and to make sure the student loan program works the way it is supposed to. This is our best chance in years to build strong guardrails into student loan servicing contracts, and to hold student loan servicers accountable if they screw things up. It is also a chance to fix the Public Service Loan Forgiveness program to make sure that our hard-working public servants get the relief that our nation promised them.
I appreciate our witnesses coming here today to give us perspective on how to make sure that happens – and I’ll be working closely with the Education Department to provide student loan relief and to rebuild the student loan system so that it works in the best interests of borrowers.
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