Greg Ogden, a 65-year-old therapist with a $25,000 student-loan balance, never anticipated he would still be paying off today the loans he took out in 1993.
It's especially frustrating because he's already made enough qualifying payments to get his balance wiped out through the Public Service Loan Forgiveness program, which forgives debt for public-sector workers such as firefighters, teachers, and nonprofit personnel.
"I have no idea when I'll be done," Ogden told Insider. "I'm happy my wife won't have to worry about this if I die because I guess it can't go after a spouse. But I've had this hanging around my neck longer than it should have."
That's because, his student-loan servicer told him, he didn't certify his employment correctly, and it took multiple tries for him to finally get accepted into the program a few months ago. But the problem is that his account says he's made only 22 out of the qualifying 120 payments to get his debt wiped out — even though he has consistently paid off his balance since Public Service Loan Forgiveness was created in 2007.
Ogden showed me emails he'd sent to his servicer since the beginning of this year. In them, he repeatedly asked for his account to be updated so he could stop making payments. The servicer's response? "We're currently experiencing unprecedented email volume, which is preventing us from responding to your specific question(s)."
Hourslong hold times with customer service, years of lost payments, student-loan-forgiveness denials due to minor paperwork errors, and conflicting guidance between the Education Department and loan servicers are just a few examples of the onslaught of concerns that readers have shared with me over the course of the student-loan-payment pause.
These issues extend far beyond the past few years, and to date, there's no easy way to improve the system so Americans pay back what they borrowed, and nothing more. On top of that, a lack of funding has resulted in a lot of finger-pointing: Student-loan servicers say the Education Department has not provided enough resources, while the Education Department blames Congress for failing to increase funding for the department to ensure a smooth repayment process for millions of borrowers.
But experts and lawmakers say it's far more complicated than that.
"This industry has a horrible track record," Sen. Elizabeth Warren told me. "Its failure to serve students has dated back decades. Student-loan debt is a terrible burden on people even when every part of the deal is perfectly executed."
Regardless of who's to blame, borrowers are getting caught in the middle. It's probably about to get worse.
Student-loan borrowers are entering uncharted territory
The Education Department has never had to reenter 28 million people into payments at the same time. That's the number of bills Education Under Secretary James Kvaal estimates will be due in October — it's five times the typical number of borrowers who enter repayment in an entire year.
Kvaal said in an interview that "student-loan programs are very, very complicated, and servicers do not have the funding that we would like to give them to better serve borrowers." Plus, federal servicers' technology may not be up to the task.
This, unfortunately, is not a new issue for government programs. Take the Obamacare rollout — President Barack Obama's administration had three years to get HealthCare.gov up and running. When it was officially established in 2013, the website was not equipped to support the 48 million Americans without health insurance who were seeking to enroll, which resulted in at least three website crashes in the months after it went live.
Obamacare had the advantage of a centralized website for anyone seeking coverage. In contrast, federal student-loan servicing has been contracted out to five companies, and the government doesn't have the resources to fully keep tabs on the industry.
Kvaal said the department gave servicers a "communications playbook" with exact wording to use in automated phone systems and emails so "they are quite clear on how all this works." It also requested that servicers provide the department with frequent updates on their communication methods and how borrowers responded to them.
Scott Buchanan, the executive director of the Student Loan Servicing Alliance — a group that represents federal servicers — said servicers communicated with the department on a nearly daily basis and that the main federal servicing companies regularly provided the department with data on customer-service call volumes and hold times.
For now, that data paints a grim picture. For example, the loan servicer MOHELA said it expected to service 7.7 million borrowers in October and that it had just 474 active customer-service representatives and another 606 in training.
"The immediacy of return-to-repayment amid ever-increasing changes to the contract administration requirements and expanded training needs, combined with the lack of sufficient funding from FSA, mean extensive servicing delays are a likely outcome," MOHELA said.
This lack of preparedness has some Republican lawmakers worried and saying the Biden administration should do more. Rep. Virginia Foxx, the top GOP lawmaker on the House education committee, said that she's not getting the information she needed from the department to feel confident about its efforts to protect borrowers during this transition.
"Secretary Cardona himself admitted it's never been done before, but we have not been able to get from the department a plan on how it is going to do this," Foxx said.
Borrowers would likely agree. Some told me they were waiting for hours to reach a customer-service representative to no avail, and beyond that, they said their payment statements were not accurate — one borrower told me she had an estimated $49,000 monthly payment, which even her servicer said did not make any sense.
Carolyn Fast, a senior fellow at The Century Foundation who focuses on higher-education policy, told me: "There's a lot of confusion and questions that borrowers have about what their obligations and options are right now. Many are worried that it could be a perfect storm of bureaucratic obstacles."
And money is complicating matters. President Joe Biden's budget request to Congress for funding in the upcoming fiscal year included a boost for Federal Student Aid, but Republican lawmakers proposed funding cuts for the office, which could leave the Education Department cash-strapped.
The return to repayment is an expense for the department because it pays servicers a percentage of the income from a loan —and those in active repayment cost more. That money, in part, helps servicers pay for additional customer-service staff, Kvaal said, adding that he's "concerned about our ability to serve students and borrowers well without those additional resources."
"We can only put as many people on the phone as a department can pay for," Buchanan said.
However, Warren told me that servicers' budget concerns were not convincing because they were paid "billions of dollars during the COVID crisis." She added, "They signed contracts to administer the loan system accurately. Those are profitable contracts. But the servicers want even more money? I have no sympathy at all."
The problem with handing borrowers over to private companies
The burdens plaguing student-loan repayment are not new and extend far beyond the Biden administration.
Experts said there's one major operational factor that kept the student-loan program from running smoothly: The Education Department contracts the servicing work out to five for-profit private companies.
Pamela Herd, a professor at Georgetown University who has published a book on administrative burdens and bureaucratic obstacles in government, compared it to the Medicare Advantage supplemental-insurance program. When you turn 65 and enroll in Medicare, you're faced with a flood of private insurers that offer plans and prescription-drug benefits. Though Medicare Advantage is publicly funded — like federal student loans — the companies that manage it are private and have minimal regulation, making the process disjointed and burdensome for enrollees.
"Programs that the government contracts out, especially social-welfare programs, tend to become just more onerous," Herd said, which is why they require more oversight. "I think part of the problem is the capacity of not just the Education Department but other government agencies to actually provide that tight oversight that you need to provide."
Warren said "there was virtually no oversight of the student-loan industry" before Biden, and she credited his Federal Student Aid office with taking steps to strengthen supervision and weed out "some truly bad apples." But she said she's concerned there were still not enough eyes on the industry as borrowers entered repayment.
For student-loan borrowers, lack of oversight has resulted in high denial rates and mismanaged processes in programs such as Public Service Loan Forgiveness and income-driven repayment programs, for which servicers had a decade or more to prepare to discharge borrowers' loans, Melissa Emrey-Arras, the director of education, workforce, and income security at the Government Accountability Office, said.
Herd said the way to make everything smoother for borrowers was to "get rid of the middlemen."
"Every program has rules about who does and doesn't qualify and how much people should receive," Herd said. "There's a world in which you take the mess associated with that and you put it on individuals and say, 'You do all the work of showing that.' Or there's the version where that responsibility gets put on the government, shifting the burden basically from individuals to government.
"And I think that's actually the right way to think about it."
What's in the cards for borrowers
When Kvaal joined the Biden administration in 2021, he said it was "immediately obvious" that the idea that "you go to college, you graduate, you get a job, and you repay your loan" was no longer the reality.
"And in a way, it was an untested experiment," he added. "We had people taking out more loans than they ever had before, and no previous generation had gone through something like this."
He said that the student-loan-payment pause was "papering over some fundamental problems": Millions of people were defaulting on their loans before the pause, only a handful of borrowers had received Public Service Loan Forgiveness, and borrowers who qualified for a disability discharge were seeing their Social Security benefits garnished.
"So there really were deep-rooted structural problems in the loan programs on the policy design but also on the execution side," Kvaal said.
Herd said that several programs with the biggest obstacles "are targeted at, quite bluntly, folks with low incomes," along with immigrant populations and people with disabilities.
For example, student-loan borrowers who can prove they have a total and permanent disability may qualify to have their loans forgiven, but previously, those borrowers were required to submit income documentation every three years. A 2016 report from the Government Accountability Office found that 98% of disability discharges that were reinstated occurred because the eligible borrowers failed to submit the required documentation, keeping them from getting relief. Education Secretary Miguel Cardona waived that requirement in 2021.
A rising tide of borrowers being unable to pay their bills over the past few decades brought in scrutiny from the GAO, and later the Consumer Financial Protection Bureau. A report released in 2003 found that the total volume of loans in default had doubled to nearly $22 billion by fiscal year 2001 from about $11 billion in fiscal year 1990. As the years went on, the GAO continued to identify flaws in student-loan programs that were hurting borrowers.
Emrey-Arras pointed to income-driven repayment plans and Public Service Loan Forgiveness as key examples of programs that required reform because they were not properly tracking borrowers' payments, leaving them in repayment far longer than necessary. It's worth pointing out these two programs are specifically aimed at people who may not have the means to pay their monthly bills in full.
So can the student-loan industry be fixed? Kvaal said there were upcoming reforms, including a new gainful-employment rule that would ensure career programs and for-profit schools were following through on quality education that would help land graduates jobs to repay their loans. In the summer, the Education Department is set to implement technological reforms to student-loan servicing and give Federal Student Aid more control over the work of its contractors. The department is also working to get broad student-debt relief to borrowers after the Supreme Court struck down its first plan. While it could run into legal challenges yet again, Kvaal said, "we're just going to keep fighting."
"We're not going to give up," he said, "and we're going to do everything we can to bring relief to borrowers who need it."