Press Release  AG Campbell Urges Biden Administration To Do More To Protect Borrowers As Student Loan Payments Resume

BOSTON — Today, Attorney General Andrea Joy Campbell co-led, alongside Attorney General Bob Ferguson of Washington, a letter to the White House and U.S. Department of Education advocating for more borrower protections and raising concerns about potential loan servicing problems as federal student loan payments resume next month.   

Over 40 million borrowers, including nearly one million in Massachusetts, are set to resume making payments in October 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.  

“Federal loan borrowers will face a multitude of challenges as they begin making payments next month, including difficulty reaching their loan servicers. We are concerned that these challenges may prevent borrowers from accessing more affordable payments, including those available under the new SAVE repayment plan,” said AG Campbell, “Amidst a significant student debt crisis, which disproportionately affects low-income borrowers, women, and people of color, it is critical that the Biden Administration take further action to avoid harm to borrowers.”  

Although the Biden Administration has taken significant steps to transform the broken federal student loan repayment system, including creating 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.  

As repayment begins, tens of millions of borrowers will simultaneously be required to navigate a complex system, many for the first time, with new servicers that have little to no experience with such volumes and do not appear to be sufficiently staffed to respond to them. Additionally, some servicers appear to be struggling to operationalize implementation of the new SAVE plan. For example, earlier this month, MOHELA, the servicer that manages all accounts on track for Public Service Loan Forgiveness, had to re-issue payment notices for borrowers in SAVE. This became necessary because MOHELA’s original notices, issued in August 2023, listed a higher monthly payment than allowable under the SAVE guidelines that took effect in July 2023. 

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 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 30^th, 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 pause billing for borrowers experiencing these issues for a period of time that would count toward eventual loan forgiveness without accruing interest, until the issues are fully resolved. The letter asks the Administration to similarly pause billing and waive interest for groups of borrowers awaiting loan forgiveness.  

In sending the letter, AG Campbell and AG Ferguson were joined by the attorneys general of Arizona, California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Michigan, Minnesota, Nevada, New York, Oregon, Pennsylvania, Vermont, Wisconsin, and the District of Columbia.  

A copy of the letter can be found here, and important information on federal loan debt relief opportunities and the upcoming return to repayment is available at mass.gov/ago/StudentLoans. Borrowers who have enrolled in or been converted to the new SAVE repayment plan are encouraged to double check their monthly payment using this chart.   

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