Warren, Smith, Markey Call On Student Loan Servicers To Support Borrowers Before Repayments Resume
Washington, DC - United States Senators Elizabeth Warren (D-Mass.), Tina Smith (D-Minn.), and Edward J. Markey (D-Mass.) sent letters 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. The letters come as the United States faces a historic student debt crisis, with nearly 43 million Americans crushed under $1.6 trillion in federal student debt and millions of borrowers are defaulting on their loans every year.
"Millions of borrowers have had relief from their student loan payments and interest for more than a year during the COVID-19 pandemic - but they now risk being thrown into extraordinary financial hardship when their payments resume. We support cancelling $50,000 of debt for each borrower to relieve this burden on our economy, but in the interim, we are requesting information on how your company is preparing for this transition to repayment and the steps it is taking to ensure that it adequately supports borrowers," wrote the lawmakers.
Student loan payments are currently scheduled to resume in October 2021. According to a Pew survey, almost 40% of borrowers do not know when their payments will resume. As the pause on payments and interest runs out, these borrowers may reach out to their loan servicer asking for guidance. However, many loan servicers have laid off staff due to the lower number of loans in active repayment, leaving the companies unprepared for a wave of borrower outreach. Although servicers are receiving lower payments than usual while loans are on pause, they are currently being paid more than twice the usual rate for loans in forbearance. Through the American Rescue Plan, Congress specifically appropriated $91 million to the office of Federal Student Aid (FSA) for outreach to borrowers.
"If struggling borrowers are dropped back into repayment on their student loans with no adjustments or support, then they could find themselves in default or distress, facing disastrous long-term economic consequences that will echo across generations. Following past emergency suspensions of student loans during natural disasters, increased numbers of borrowers became delinquent or defaulted on their loans. A wave of student loan defaults would cause long-term damage to borrowers' credit and financial stability and could put a sudden and unnecessary drag on the recovering economy," the lawmakers continued.
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.
- In May 2021, Senator Warren led her colleagues in sending a letter requesting information about the steps the Department of Education (ED) and the 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 October.
- In April 2021, 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.
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