- Student-loan payments are resuming in October without broad debt relief.
- A group of Democrats asked CEOs of student-loan companies how they are preparing for the restart.
Student-loan payments are resuming in just a few months, and a group of Democratic lawmakers want to make sure the companies that manage that debt are ready.
On Tuesday, a group of six Democratic senators — Elizabeth Warren, Richard Blumenthal, Chris Van Hollen, Ed Markey, Sherrod Brown, and Bob Menendez — sent letters to the CEOs of federal student-loan companies to request information on their plans to support borrowers during the return to repayment in October.
Since March 2020, student-loan payments have been on pause, with interest waived, to provide borrowers financial relief during the pandemic. Both former President Donald Trump and President Joe Biden extended the pause numerous times, but the bill to raise the debt ceiling that Biden recently signed into law codified the end of the student-loan payment pause. That means that while a president can implement a pause for a future emergency, Biden cannot do so again as a result of COVID-19.
With most borrowers not required to make payments for over three years, the group of Democratic lawmakers want to be sure companies are prepared for this "unprecedented event with a heightened risk of borrower harm" — especially after the Supreme Court struck down Biden's broad plan for debt relief.
They said that "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."
"For instance, in response to our July and December 2021 letters, only one servicer out of six indicated that they had conducted multiple rounds of outreach to borrowers; only half of the servicers shared any information on borrower response rates, and those that did share this information had not been in touch with the majority of new borrowers," they continued. "With the resumption of payments now fast approaching, we are requesting updated information on your plans to ensure a smooth transition back into repayment for borrowers."
The lawmakers asked the CEOs to respond to a serious of questions by August 1 regarding their preparations to resume payments, including how many borrowers the companies have contacted since June, how the companies are training their customer service staff, what the average wait time is for borrowers seeking help from the company, and how the companies are determining borrowers' payments plans for October.
Some borrowers have already been struggling during the payment pause to get help from their servicers. For example, one borrower previously told Insider that he had just a simple question about the status of his Public Service Loan Forgiveness progress, but he ended up spending hours on hold and was never able to reach a representative.
"The first time I tried to call was a 144 minute estimated wait time," the borrower said. "The second time I called was a 149 minute wait. And then most recently, I tried to call and it was 50 minutes. And each of these times I didn't have time to wait. I thought it would be a quicker call. And one time I stayed on the call for nearly three hours."
Those problems could also be exacerbated by a lack of funding for Federal Student Aid. Republicans on the House Appropriations Committee recently released legislation to fund the government for fiscal year 2024, and it included a $265 million cut to the agency that oversees student aid administration.
While Biden's Education Department has urged Congress to increase its funding, it also plans to put some temporary safeguards in place for borrowers. It announced a 12-month "on-ramp" period once payments resume during which borrowers will not be reported to credit agencies for missed payments, along with a new income-driven repayment plan to lower monthly payments.