July 14, 2021

In Response to Warren and Markey, Student Loan Servicers Indicate They Are Not Prepared for Payments to Resume

Growing Concerns Over “Unprecedented” Complications 

Senators Reiterate their Call On Biden to Extend Pause on Student Loan Payments 

Text of Letter (PDF) | Servicer Responses

Washington, DC - United States Senators Elizabeth Warren (D-Mass.) and Edward J. Markey (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.

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:

?      The 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.

?      Most 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 to borrowers.

?      Servicers 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. 

?      Transitioning 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.

Senator Warren is one of the nation's leading voices calling for student debt cancellation to boost our economy, help close the racial wealth gap for borrowers, and put an end to predatory practices that harm and trap borrowers in years of debt.


?     Last month, Senator Warren, Majority Leader Chuck Schumer (D-N.Y.), Representative Ayanna Pressley (D-Mass.), and Representative Joe Courtney (D-Conn.) led their colleagues in a bicameral letter to President Biden calling on him to extend the pause on federal student loan payments until at least March 31, 2022.

?     In June, Senator Warren led her colleagues in sending a letter to the CEOs of all federal student loan servicers requesting information about the steps the companies are taking to transition millions of federal student loan borrowers back into repayments once the pause on student loan payments and interest ends in October 2021.

?     In May, Senator Warren led her colleagues in sending a letter to Secretary of Education Miguel Cardona requesting updates on ED’s actions to protect students during the pandemic.

?     In May, Senator Warren led her colleagues in sending a letter requesting information about the steps ED and the Office of Federal Student Aid (FSA) are taking to help transition millions of federal student loan borrowers back into repayment ahead of the scheduled end for paused student loan payments and interest in September.

?     In April 2020, Senators Warren and Raphael Warnock (D-Ga.) led a group of colleagues in a letter to Education Secretary Miguel Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.

?     That same month at her first hearing as chair of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren called out giant student loan servicer Pennsylvania Higher Education Assistance Agency for its mismanagement of the Public Student Loan Forgiveness Program.

?     Senator Warren also questioned Jack Remondi, CEO of one of the nation's largest student loan servicers, Navient, on the company's long history of abusive and misleading behavior towards borrowers and how the company has made millions of dollars by profiting off the broken student loan system.

?     Senator Warren has also been continuing her calls for President Biden to use his existing authority to cancel $50,000 in student debt and highlighted data that she obtained from the Education Department revealing the benefit of student debt cancellation.

?     In March 2021, Senators Warren and Bob Menendez (D-N.J.) applauded the passage of their Student Loan Tax Relief Act as part of the American Rescue Plan. The provision makes any student loan forgiveness tax-free, ensuring borrowers whose debt is fully or partially forgiven are not saddled with thousands of dollars in surprise taxes. During her time in the Senate, she has helped return tens of millions of dollars tax-free to students cheated by for-profit colleges.