May 24, 2021

Warren, Colleagues Request Updates from Education Department on Actions taken to Protect Student Borrowers

Text of Letter (PDF) 

Washington, D.C. - U.S. Senators Elizabeth Warren (D-Mass.), Tina Smith (D-Minn.), Chris Van Hollen (D-Md.), and Richard Blumenthal (D-Conn.) sent a letter to Secretary of Education Miguel Cardona requesting updates on the Education Department's (ED) actions to protect students during the pandemic. The letter requests information on ED's plans for crucial upcoming decisions that will shape borrowers' experiences for years to come, including preparations for restarting student loan payments in the fall, the planned transition to the NextGen platform, and an opportunity to reshape its relationship with student loan servicers.

The COVID-19 economic recovery has so far been "K-shaped," meaning that unemployment and financial stress have disproportionately hurt those who were already struggling before the pandemic. For many millennials, who are now 24 to 39 years old, this is the second economic crisis of their working lives; millennials have seen lower rates of economic growth as young adults than any generation in the 20th century. This financial situation is dire for student borrowers who are struggling under an increasing student debt burden and, in particular, disproportionately affects Black and Latino borrowers.

Executive actions by former Secretary Betsy DeVos and the passing of the Coronavirus Aid, Relief and Economic Security (CARES) Act paused payments for millions of borrowers. Recognizing the significant burden that student debt places on borrowers during an economic crisis, President Biden has extended this pause to September 30, 2021, for the 87% of borrowers with direct federal loans.

"Cancelling $50,000 in student loan debt would dramatically lighten this burden and entirely eliminate student debt for 84% of borrowers, but even this major step toward relief would still leave millions of borrowers facing the resumption of payments in the fall. During the pandemic, borrowers have reported confusion about how pandemic assistance provisions apply to them, suggesting that proactive steps prior to the end of the payment pause are needed to prevent them from falling through the cracks," the lawmakers wrote.

"As borrowers face these difficult economic circumstances, ED is also facing important choices about the future of the student loan program. All of the major student loan servicers' contracts are set to expire in the next year, opening a crucial opportunity to reshape the student loan servicing system with greater accountability for performance and borrowers' outcomes," the lawmakers continued.

The contracting process for the Department's long-planned shift to the NextGen platform is currently on hold. The transition to NextGen could provide an opportunity to improve borrowers' experiences and diminish the power of loan servicers, which have historically subjected borrowers to poor service and misleading or illegal practices. At the same time, its implementation has been plagued with delays and confusion. The decisions ED makes in the coming months about the future of NextGen and related servicing contracts will affect borrowers' experiences of loan repayment for years to come.

The lawmakers asked ED a series of questions including the Department's plans for the coming transition to new student loan service contracts, an update on the NextGen project, a breakdown of servicers' activities to support borrowers during the pandemic, data related to preparations for restarting payments, and ED's actions to support borrowers in bankruptcy. They have requested a response no later than June 4, 2021.

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.

  • Earlier this month, Senator Warren led her colleagues in sending a letter requesting information about the steps the Department of Education (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.