Student-loan companies explain why they're not to blame for borrowers' repayment challenges. A group of Democrats said it's still 'deeply concerning.'

• A group of Democrats asked student-loan companies for updates on the return to repayment.
• They said the companies' prior responses were inadequate in addressing the issues borrowers have faced.

Four federal student-loan companies explained why they're still struggling to facilitate the return to repayment for borrowers. A group of Democrats aren't satisfied with their answers.

On Wednesday night, Sens. Elizabeth Warren, Richard Blumenthal, Ed Markey, and Chris Van Hollen sent letters first reviewed by Business Insider to the CEOs of the four major servicers: MOHELA, Nelnet, Aidvantage, and EdFinancial.

In September, the lawmakers inquired how the servicers were faring with their customer service abilities, along with how they were communicating with borrowers as they navigated the return to repayment — and after receiving the servicers' responses, obtained by BI, the Democrats want more information to ensure the servicers are acting in borrowers' best interests.

"In response to numerous reports of long wait times and dropped calls, we requested information about the experiences of borrowers who attempt to contact your company," Democrats wrote in their letter to Nelnet.

"However, your response lacked critical details and failed to shed light on the difficulties your borrowers face," they continued. "Nelnet's response was deeply concerning as it failed to answer any of our questions, placed blame on others for the challenges borrowers are facing, and refused to acknowledge its own responsibility — despite anticipating a difficult return to repayment."

And in their letter to MOHELA, they pushed back on the idea that the servicer does not have sufficient funding to properly manage the return to repayment, writing that "ED pays the servicers more than one billion dollars a year. And from 2020 to 2023, MOHELA has spent $810,000 on lobbying, which suggests that it has the resources to improve the service it provides to borrowers."

The lawmakers requested each servicer provide answers on a number of questions by January 2, 2024, including average wait times for borrowers to speak to customer service, the causes of errors for borrowers who filed complaints, what penalties, if any, the servicer has faced for making mistakes, and their plans for fixing errors identified by the Education Department.

Here's what the servicers told the group of lawmakers as to why they're continuing to struggle with the return to repayment.

What student-loan companies think

The four federal servicers delivered their responses to the Democrats' September inquiry in October, and they each provided their own reasoning for the repayment hurdles they were facing.

MOHELA's response primarily focused on the lack of Federal Student Aid funding "for servicing during the unprecedented event," which it said "pales in comparison to the enormity of work associated with assisting millions of borrowers in a condensed time frame."

Nelnet similarly expressed concerns with a lack of FSA funding, and it also went on to say that despite conducting outreach to borrowers prior to the payment resumption, "we suspect many borrowers had no real sense of urgency because repayment was suspended and many expected their loans to be discharged based on the Administration's statements, leading many borrowers to wait until the last minute."

The company also said that minimal resources to update computer systems and increase staffing left it "flatfooted to deal with unanticipated call volume and could not properly prepare to answer borrowers' questions."

Both EdFinancial and Maximus pointed to the unprecedented nature of the return to repayment as a reason why customer service wait times are unpredictable: "Every communication that is sent to borrowers or announcement that is made in the media regarding new plans and discharges drives up borrower contacts to their servicers leaving us with no reliable way to predict volumes on a daily basis," EdFinancial wrote. "Higher call volumes and wait times under these conditions should not be considered a surprise development."

The Education Department recently announced a new framework for enforcing oversight over servicers, including withholding their pay should the department find they are not fulfilling their contractual obligations. Each of the servicers said they were working with the department to ensure they're in compliance with their contracts.