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- Elizabeth Warren asked student loan managers last month how they prepare borrowers to restart payments.
- Agents said they needed more time, calling the transition to reimbursement “unprecedented.”
- Lawmakers and lawyers have called on Biden to extend the payment freeze until next year.
- See more stories on the Insider business page.
The resumption of student loan payments on October 1 is fast approaching as borrowers, lawmakers and advocates sound the alarm bells about restarting payments too soon.
It turns out that the companies that collect the payments aren’t ready either.
Last month, Senators Elizabeth Warren of Massachusetts, Ed Markey of Massachusetts and Tina Smith of Minnesota sent a letter to CEOs of all student loan departments asking for information on how each is preparing to rehabilitate borrowers. reimbursement.
On Tuesday, Warren and Markey posted the responses from those servers. The general theme was that service providers, as well as borrowers, feared restarting payments in just three months, senators said.
“Responses to our survey indicate that neither student loan borrowers nor student loan managers are ready to resume payments, and managers will need a lot of time to ensure staff and procedures are ready to go. provide borrowers with a high level of support, ”the senators said. wrote in a letter to President Joe Biden.
They said a duty officer even noted in his response that attempting to put more than 43 million borrowers in repayment at once was “unprecedented.”
The other main conclusions of the responses are as follows:
- The payment break had brought significant relief to borrowers, with $ 2.5 million having fully repaid their loans during the pandemic;
- Most borrowers had very little contact with their providers during the pandemic, suggesting that they would not be sufficiently prepared to restart payments;
- Service officers needed more time to ensure there is sufficient staff to support borrowers;
- And the transition of borrowers from FedLoan Servicing, which recently announced it would not extend its contract with the Department of Education, would require additional time to ensure borrowers are not harmed in the process.
Last week, the Pennsylvania Higher Education Assistance Agency informed the department that it would not extend its 12-year contract for FedLoan Servicing, which handles loans for 8.5 million borrowers, beyond Dec. 14. Warren and Markey wrote in their letter that they were trying to restart payments just weeks after the agents were transferred “would overwhelm an already broken student loan system.”
On June 23, 64 Democrats, led by Senate Majority Leader Chuck Schumer and Warren, urged Biden in a letter to extend the payment hiatus until March 31 or until the economy returns to levels pre-pandemic jobs, whichever is longer.
The next day, 128 organizations including the American Civil Liberties Union and the Service Employees International Union sent a letter urging the president to extend the payment break until the administration kept its promises to fix the loan system. student and write off federal student debt. .
And in a June 30 letter, Senator Patty Murray and Representative Bobby Scott, the chairs of the Senate and House education committees, urged Biden to extend the payment break until early 2022 for s ” ensure borrowers have the information they need to get started again. Payments.
Education Department officials have also reportedly urged Biden to extend the payment break. Although Education Secretary Miguel Cardona did not say if such an extension would occur, he hinted it could happen.
“As the economy recovers from this unprecedented crisis, borrowers should not face administrative and financial disaster as they begin to regain their footing,” wrote Warren and Markey. “We urge you to extend the pause on interest and student loan payments to allow time to begin fixing the flawed student loan system.”
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