Senator Warren Urges Department of Education to Protect Borrowers By Overhauling Student Loan Collections Program
“I am concerned that the end of the federal payment pause this year risks exposing borrowers who struggle to make their payments to wage garnishments, tax refund offsets, and other forms of collections which can exacerbate financial distress.”
Washington, D.C. – United States Senator Elizabeth Warren (D-Mass) sent a letter to the Department of Education (ED) raising concern ahead of student loan payment pause expiration over plans to resume collecting on student loans and sharing recommendations to revamp the department’s student debt collection program. This letter comes after the Supreme Court’s decision to abandon the law and strike down the President’s August 2022 plan to cancel up to $20,000 in student debt for working families.
“I am concerned that the end of the federal payment pause year risks exposing borrowers who struggle to make their payments to wage garnishments, tax refund offsets, and other forms of collections which can exacerbate financial distress – particularly if, as the Department has projected, delinquencies and defaults spike in the absence of additional loan relief,” wrote Senator Warren.
After three years of paused student loan payments, interest, and collections, monthly payments are set to start up again on October 1st, with interest beginning to accrue starting on September 1st. A recent study released by the Consumer Financial Protection Bureau noted that delinquency rates for student borrowers have increased since the pandemic and more than 1-in-13 borrowers are currently behind on other payments. ED has also projected that delinquencies and defaults will spike in the absence of additional loan relief.
“As the end of the federal pause on student loan payments, interest, and collections looms, I urge the Department to take every opportunity to protect borrowers who may struggle with repayment and reform the process by which ED collects on defaulted loans,” wrote Senator Warren.
Following the Supreme Court’s disappointing decision last month to overturn President Biden’s August 2022 plan to cancel up to $20,000 in student loans, Senator Warren made the following recommendations to help ED revamp its student debt collections program and protect struggling borrowers after payments resume:
- Develop a comprehensive policy to discharge student debt in cases of long term default.
- Develop a policy to discharge student debt in cases where ED does not have updated contact information.
- Stop requiring the repayment of the full amount of debt when a borrower enters default.
- Exhaust all other options and determine if a borrower is eligible for debt discharge before determining the debt as “legally enforceable” and sending it to collections.
- Allow borrowers who apply for and are approved for Income-Driven Repayment (IDR) while in default to be immediately pulled out of default.
- Strengthen contract terms with and enforcement of debt collectors to better protect borrowers from predatory collection practices.
In the letter, Senator Warren voiced support for the Administration’s latest announcement to create a 12-month on-ramp transition period to support borrowers smoothly and successfully return to repayment and avoid some of the harshest consequences of missed, partial, or late student loan payments.
“The Department should build on these steps and revamp its student debt collections program to protect struggling borrowers after payments resume.” wrote Senator Warren.
Senator Warren is one of the nation’s leading voices for student loan borrowers and has a long track record of conducting oversight of federal student loan servicers:
- In April 2023, Senator Warren led 16 senators in sending a letter to the Chair and Ranking Member of the Senate Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies requesting the committee provide $2.7 billion in Fiscal Year (FY) 2024 to fund the Office of Federal Student Aid
- In February 2023, Senator Warren released a new report based on her investigation into how efforts by Republican officials and special interests to block the President’s plan to cancel up to $20,000 in federal student loan debt would affect Americans.
- In October 2022, Senator Warren and Representative Ayanna Pressley (D-Mass.) visited communities across Massachusetts to celebrate the Biden administration’s student debt cancellation plan and help residents sign up for student loan relief.
- In October 2022, Senator Warren called on the Department of Education to hold for-profit colleges executives accountable for scamming students out of a quality education and loading them up with student debt.
- In September 2022, Senator Warren and Representative Pressley sent a letter to federal student loan servicers to inquire about the steps they are taking to ensure borrowers are receiving timely information about President Biden’s debt cancellation plan.
- In September 2022, Senator Warren sent a letter to the Department of Justice (DOJ) urging DOJ to issue and implement updated student debt bankruptcy guidance without delay following the Biden-Harris administration’s historic decision to cancel up to $20,000 in student debt for up to 43 million borrowers and overhaul the student loan system.
- In August 2022, Senator Warren recognized the Department of Education for protecting students and taxpayers by taking action to revoke ACICS status as an accreditor.
- Senator Warren, along with Senate Democratic Whip Dick Durbin (D-Ill.), Senator Brown and Representatives Pramila Jaypal (D-Wash.) and Mark Takano (D-Calif.), urged Secretary of Education Miguel Cardona, urging the Department of Education (ED) to swiftly discharge the loans of borrowers defrauded by predatory for-profit colleges and universities, including those operated by Corinthian College.
- Senator Warren, along with Senate Majority Leader Charles E. Schumer (D-N.Y.) and Representatives Jayapal, Pressley, Ilhan Omar (D-Minn.), and Katie Porter (D-Calif.) led more than 80 colleagues in a bicameral letter to the Department of Education calling for it to release the memo outlining the Biden administration’s legal authority to cancel federal student loan debt and immediately cancel up to $50,000 of debt for Federal student loan borrowers.
- Senator Warren, along with Senate Majority Leader Schumer and Representative Pressley released new analysis showing that resuming student loan payments would strip $85 billion every year from the economy.
- Senator Warren, along with Senators Van Hollen, Blumenthal, and Smith sent letters to four federal loan servicers, requesting information on their plans to support borrowers when student loan payments resume.
- Senator Warren, along with Senators Brown, Blumenthal, Smith, and Van Hollen sent a letter to Maximus, the company that is assuming Navient’s federal student loans servicing contract, questioning its troubling history and seeking assurances that borrowers will receive appropriate services and protections during the transition.
- Senator Warren, along with Senators Brown, Blumenthal, Smith, Van Hollen, Booker, Sanders, Tammy Baldwin (D-Wis.), and Markey sent a letter to the Department of Education urging Secretary Cardona to use his authority to automatically remove all student loan borrowers in default.
- Senator Warren, along with Senators Van Hollen, Blumenthal, Brown, Smith, Markey, and Robert Menendez (D-N.J.) sent letters to the heads of Pennsylvania Higher Education Assistance Agency, Granite State, and Navient calling on them to correct past errors with borrowers’ accounts and address growing concerns over their preparedness to transfer millions of borrowers to new servicers.
- Senator Warren, along with Senator Markey and Representative Pressley, released a report that detailed the ongoing failures of the Public Service Loan Forgiveness program for public servants in Massachusetts.
- At a hearing in July 2021, Senator Warren pushed for borrower protections after a major student loan servicing shakeup.
- In July 2021, Senator Warren released a statement regarding the end of the Pennsylvania Higher Education Assistance Agency's (PHEAA) contract servicing student loans with the Department of Education.
- In June 24, 2021, Senators Warren and John Kennedy (R-La.) called on PHEAA CEO to address concerns about false and misleading statements made during a subcommittee hearing on student loans, which was chaired by Senator Warren.
- In May 2021, Senator Warren led her colleagues in sending a letter requesting information about the steps the Department of Education 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 to the pause on student loan payments and interest in September.
- 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.
- In April 2021, at her first hearing as chair of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Economic Policy, Senator Warren called out PHEAA for its mismanagement of the Public Student Loan Forgiveness Program.
- In April 2021, Senator Warren also questioned Jack Remondi, CEO of Navient, on the company's long history of abusive and misleading behavior towards borrowers and their profiting off the broken student loan system.
- In March 2021, Senators Warren and Menendez applauded the passage of their Student Loan Tax Relief Act as part of the American Rescue Plan.
- In December 2020, Senator Warren introduced the Consumer Bankruptcy Reform Act and in 2019, co-led the Student Borrower Bankruptcy Relief Act with Senator Durbin to make student loans dischargeable through bankruptcy.
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