Saturday, November 06, 2021

16 million student-loan borrowers could be facing 'millions of mistakes and problems' at the hands of new student-loan companies, Elizabeth Warren says


Ayelet Sheffey
Thu, November 4, 2021


Students toss their hats at Wesleyan University's commencement ceremony in 2018. Eduardo Munoz Alvarez/Getty Images


Three student-loan companies are shutting down federal services, impacting 16 million borrowers.


Elizabeth Warren joined six Democrats in requesting information from those companies on the transitions.


They noted that in the past, transitions have caused a number of mistakes that harmed borrowers.


Three student-loan companies announced they are shutting down their federal loan services at the end of this year, placing 16 million borrowers in the hands of new companies.

Seven Democrats, led by Massachusetts Sen. Elizabeth Warren, want to ensure those borrowers will not be harmed during the transition before student-loan payments resume in 90 days.

In letters to Navient, the Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources - the three companies ending their federal loan servicing - Warren and six other senators requested information on how each of the companies will ensure "a smooth transfer of tens of millions of borrowers' accounts to new student loan servicers."

"Student loan servicers have a long history of misleading borrowers about available options, mismanaging programs, and cheating borrowers out of protections developed to help them pay back their student loans," the lawmakers, including Massachusetts Sen. Ed Markey, wrote. "In previous transfers, failures to transfer complete and accurate information left hundreds of thousands of borrowers with account problems that continue to plague the federal loan portfolio today."

They added that during past servicer transitions, "millions of mistakes and problems" caused borrowers to face penalties due to servicer error in processing payments, and months of qualifying payments toward loan forgiveness programs, like Public Service Loan Forgiveness (PSLF) could be lost.

PHEAA manages the entire PSLF portfolio, holding millions of accounts for public servants such as teachers and police officers seeking loan forgiveness after ten years of qualifying payments. The lawmakers requested PHEAA provide them with information on how they plan to maintain borrowers' payment records and ensure they will be processed correctly, along with requests to all three companies on further information regarding the transition.

The Consumer Financial Protection Bureau (CFPB) has previously highlighted issues that could arise from servicer transitions, resulting in lost payments, surprise late fees, and processing problems. The lawmakers wrote that on top of the difficulties with the transition, the Education Department has the "unprecedented logistical challenge" of resuming student-loan payments for borrowers after a nearly two-year pandemic pause.

Despite the significant administrative burdens borrowers and loan companies could be facing, though, Warren has previously said that borrowers no longer having to pay their debt to Navient and PHEAA is a good thing.

She told Insider last month that the 6 million borrowers under Navient will be "far better off," citing the company's decades spent "misleading, cheating, and abusing student borrowers." Insider reported in April on the comprehensive history Warren has with Navient, most recently telling Navient's CEO, John Remondi, that he should be fired for the abuses that happened under his leadership.

She also said in June that the 8.5 million borrowers serviced by PHEAA could "breathe a sigh of relief" since they would no longer have to deal with the company that oversaw a 98% denial rate for PSLF, and Warren told Insider in a July interview that "the days are over" when student-loan companies could do "a terrible job."

But despite administrative burdens, an Education Department spokesperson told Insider after Navient announced plans to shut down that it still "expects" payments to resume on February 1, as planned.

"We will continue to work to ensure that all of our borrowers can experience a successful return to repayment," the spokesperson said. "The Department expects student loan payments to resume after Jan. 31, 2022."

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