Elizabeth Warren says student-loan companies can't use lack of funding as an excuse for bad customer service — and she's 'deeply worried' they're not ready for repayment starting next week

• Sen. Elizabeth Warren led some Democratic colleagues in sending letters to four student-loan companies requesting information on the repayment restart.
• They said they're "deeply worried" the companies are not prepared to help borrowers during this transition.

Senator Elizabeth Warren is worried that four federal student-loan companies aren't up to the task of transitioning millions of borrowers back into repayment in a few days.

On Thursday, Warren led three of her Democratic colleagues — Sens. Chris Van Hollen, Ed Markey, and Richard Blumenthal — in sending letters to the CEOs of Nelnet, MOHELA, EdFinanical, and Maximus Federal Services requesting information on how they have prepared for repayment leading up to the October restart. The fifth federal loan servicer, Central Research Inc., is the only new servicer that signed a contract with the Education Department and did not receive a letter because their operations are not scheduled to begin until 2024.

After Warren and five of her Democratic colleagues asked servicers for details on their repayment preparation in July, the lawmakers' Thursday letter said the servicers' responses left them "deeply worried." The servicers warned of customer service delays due to a lack of funding from Congress — House Republicans have proposed cutting funding for Federal Student Aid, which the Education Department has previously warned would pose a challenge to repayment and debt relief operations.

While Democrats have called for Congress to fulfill President Joe Biden's request to increase funding for the agency, the four lawmakers on Thursday said a lack of money is not enough of a reason for servicers to deliver poor customer service to borrowers.

"We recognize that the Office of Federal Student Aid (FSA) is facing a daunting challenge—holding servicers accountable to ensure they are helping millions of federal student loan borrowers resume payments and implementing congressionally mandated reforms to fix the student loan system—on a limited budget," they wrote.

But they added that they're "skeptical of [servicers'] claim that insufficient funding is keeping them from fulfilling their most foundational obligation considering that they were paid on average approximately $2 a month per account amounting to billions of dollars, while payments, interest, and collections were suspended during the public health emergency."

Additionally, responses to Warren's July letter indicated that at that point, nearly 6 million borrowers still had not created accounts with their new servicers. Nearly 17 million borrowers were transferred to different servicers during the pandemic, and the Consumer Financial Protection Bureau previously found those transfers have resulted in missing paperwork and issues keeping track of payments. Some servicers also did not have borrowers' proper contact information on file — meaning some might not have received any communications leading up to repayment.

This information will likely not come as a surprise to borrowers who have been attempting to get help with repayment over the past for months. As the lawmakers noted in their letter, some borrowers have been "waiting three or four hours before connecting with a representative" due to the influx of calls servicers have been receiving, with some borrowers being forced to hang up without receiving any assistance.

The lawmakers requested the CEOs provide information on a series of questions by October 11, including the average call time wait for borrowers, how many steps it takes borrowers to navigate the automated call center menu, how many borrowers have complained about errors in their monthly payments, and the percentage of staff that are fully trained to help borrowers with their inquiries.

These letters come just days before pandemic relief for federal borrowers comes to an end. After over three years, interest began accruing on balances in the beginning of September, and borrowers' first bills will start becoming due in October. Along with Warren and Democrats, Republican lawmakers have also expressed concerns with servicers' preparedness to handle this unprecedented transition back into repayment. Rep. Virginia Foxx and Sen. Bill Cassidy, top Republicans on the House and Senate education committees, respectively, recently requested the Government Accountability Office investigate the guidance the Education Department has given to servicers regarding repayment.

A looming government shutdown if Congress fails to reach a funding agreement by September 30 could also complicate matters. White House Press Secretary Karine Jean-Pierre said during a Monday press briefing that it would further strain Federal Student Aid's ability to assist borrowers over the next month.

"A prolonged shutdown lasting more than a few weeks could substantially disrupt the return to repayment effort and long-term servicing support for borrowers," Jean-Pierre said. "So, the Department of Education will do its best to support borrowers as they return to repayment, as we have been saying for the past several months. But an extreme Republican shutdown, if this occurs, could be disruptive."