Menendez seek answers from federal loan servicers on plans to support borrowers ahead of student loan payment restart
WASHINGTON, D.C. – U.S. Senators Bob Menendez (D-N.J.), Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio), Edward Markey (D-Mass.), and Chris Van Hollen (D-Md.) Thursday sent letters to federal loan servicers, including Higher Education Loan Authority of the state of Missouri (MOHELA), Nelnet, EdFinancial, and Maximus Federal Services Inc., requesting information about their plans to support the more than 40 million federal student loan borrowers who will soon resume payments on their student loans.
Borrowers are set to resume payments starting in October, and over the last three years, a number of servicers have exited the federal student loan program resulting in borrowers being transferred over to new servicers. This has opened the door for potential mistakes in the transfer process, including incorrect balances, improper claims of delinquency, and revised amortization schedules.
“Even more alarming is that, according to the Wall Street Journal, more than seven million borrowers have not yet been assigned to a payment plan,” wrote the Senators. “Most of these borrowers have graduated or are otherwise no longer enrolled in a school, raising concerns that servicers may have trouble locating or contacting these borrowers ahead of the payment resumption.”
Over the course of the pandemic, Sen. Menendez and other Senate colleagues wrote to servicers requesting information about steps the companies are taking to ensure a smooth transition back to repayments for millions of federal student loan borrowers. In 2021, the lawmakers received disappointing responses with only one servicer out of six indicating that it had conducted multiple rounds of outreach to borrowers.
“Our previous correspondence with student loan servicers indicated that they had had little engagement with borrowers throughout the pandemic and were not prepared to support borrowers once payments resumed,” the Senators said.
Ahead of the looming deadline and 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, the lawmakers also shared concern over reports that servicers are laying off employees and may be unprepared to handle the large volume of outreach from borrowers.
“It is critical that servicers dedicate sufficient staff to respond to borrowers seeking information about the return to repayment, provide accurate information to borrowers about their payment obligations and options to manage their loan, ensure borrowers are assigned to the appropriate payment plan, and notify borrowers about any changes on a timely basis,” the Senators said.
