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AG Nessel Urges Biden Administration to Do More to Protect Borrowers as Student Loan Payments Resume

LANSING – Michigan Attorney General Dana Nessel joins 19 attorneys general in calling for further protections for borrowers when student loan payments resume in October. Over 40 million borrowers are set to resume making payments following a three-and-a-half-year pandemic payment pause. In that time, a majority of loans were transferred to new servicers. Congress passed a law in June barring further extensions of the payment pause. 

“The pause in student loan payments during the pandemic provided critical relief to millions of borrowers,” Nessel said. “The resumption of payments could plunge many Michigan residents into financial hardship and confusion as they navigate the complex federal loan repayment system. I join my colleagues in urging the Biden Administration to provide robust protections to borrowers against loan servicing errors and bad actors as they try to repay their student loan debt.” 

Although the Biden Administration has taken significant steps to transform the broken federal student loan repayment system, including creating Saving on a Valuable Education (SAVE) — the new, more affordable income-driven repayment (IDR) plan — and restoring borrowers’ credit toward the Public Service Loan Forgiveness Program, the coalition of attorneys general cautions that current circumstances are likely to create serious and widespread loan servicing problems, especially as the U.S. Department of Education itself appears to lack capacity to assist borrowers, oversee servicers, and enforce borrower protections during the return to repayment.  

Moreover, the transfer of nearly 30 million borrower accounts to new servicers during the pandemic has created the potential for significant and widespread account and servicing errors, including billing problems, inaccurate account information, and placement in incorrect repayment plans. The coalition’s letter reports that borrowers are already filing complaints concerning a lack of timely resolution to such errors, extraordinary call wait times—including hold times in excess of 400 minutes—and delays in receiving assistance from servicers. The letter notes that even some state agencies are having trouble obtaining timely servicer responses through government complaint escalation channels. 

The return to repayment coincides with the potential shutdown of the federal government if Congress fails to pass legislation to fund operations by September 30th, potentially exacerbating a lack of borrower support and servicer oversight as the return to repayment begins. 

In their letter, the states also express concern that many of the reported account issues are affecting low-income borrowers. The states go on to explain that although the Administration has opened potential additional avenues toward debt relief, these avenues are of limited use in resolving return to repayment problems and do not address the problem of interest accrual. 

While the states appreciate the steps the Administration has taken to protect borrowers who miss monthly payments in the first twelve months of repayment from credit harm and default, they believe further action can and should be taken. Specifically, the coalition urges the Biden Administration to do more to mitigate harm to borrowers, including instructing its servicers to liberally place borrowers affected by servicing errors, or who are unable to obtain affordable monthly payments consistent with the Department’s guidelines, into forbearance. The letter asks that the same forbearance be applied to groups of borrowers who are awaiting loan forgiveness. 

In sending the letter, co-led by Massachusetts Attorney General Andrea Joy Campbell and Washington Attorney General Bob Ferguson, AG Nessel was joined by the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Maryland, Minnesota, Nevada, New York, Oregon, Pennsylvania, Vermont, and Wisconsin. 

A copy of the letter is available here.


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