    [Senate Hearing 117-661]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 117-661

         PROTECTING STUDENT LOAN BORROWERS AND THE ECONOMY IN UPCOMING
                                  TRANSITIONS

    =======================================================================

                                    HEARING

                                   before the

                                SUBCOMMITTEE ON
                                ECONOMIC POLICY

                                     of the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED SEVENTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                       EXAMINING THE STUDENT LOAN CRISIS

                                   __________

                                 JULY 27, 2021

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                                 _________

                     U.S. GOVERNMENT PUBLISHING OFFICE

    52-109 PDF               WASHINGTON : 2023

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                         SHERROD BROWN, Ohio, Chairman

    JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
    ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
    JON TESTER, Montana                  MIKE CRAPO, Idaho
    MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
    ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
    CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
    CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
    TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
    KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
    JON OSSOFF, Georgia                  JERRY MORAN, Kansas
    RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                         STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                     Brad Grantz, Republican Staff Director

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                        Charles J. Moffat, Hearing Clerk

                                     ______

                        Subcommittee on Economic Policy

                     ELIZABETH WARREN, Massachusetts, Chair

               JOHN KENNEDY, Louisiana, Ranking Republican Member

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
    TINA SMITH, Minnesota                KEVIN CRAMER, North Dakota
    JON OSSOFF, Georgia                  STEVE DAINES, Montana

                  Gabrielle Elul, Subcommittee Staff Director

             Natalia Riggin, Republican Subcommittee Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                             TUESDAY, JULY 27, 2021

                                                                       Page

    Opening statement of Chair Warren................................     1

                                   WITNESSES

    Letitia James, Attorney General for the State of New York........     3
        Prepared statement...........................................    25
    Randi Weingarten, President, American Federation of Teachers.....     5
        Prepared statement...........................................    26
    Persis Yu, Director, Student Loan Borrower Assistance Project,
      National Consumer Law Center...................................     6
        Prepared statement...........................................    27

                  Additional Material Supplied for the Record

    Letter submitted by Sarah Ducich, Senior Vice President, Public
      Policy and Government Relations, Navient.......................    35

                                     (iii)

         PROTECTING STUDENT LOAN BORROWERS AND THE ECONOMY IN UPCOMING
                                  TRANSITIONS

                                  ----------

                             TUESDAY, JULY 27, 2021

                                   U.S. Senate,
      Committee on Banking, Housing, and Urban Affairs,
                               Subcommittee on Economic Policy,
                                                        Washington, DC.
        The Subcommittee met at 3:03 p.m., via Webex and in room
    538, Dirksen Senate Office Building, Hon. Elizabeth Warren,
    Chair of the Subcommittee, presiding.

              OPENING STATEMENT OF CHAIR ELIZABETH WARREN

        Chair Warren. This hearing will come to order. This hearing
    is in a hybrid format. Our Members are in person, but we will
    have witnesses who are testifying both in-person and by video.
        So, welcome to the second Economic Policy Subcommittee
    hearing on the student loan crisis. When we held our first
    hearing on this subject in April, I emphasized that the
    economic crisis caused by the pandemic and the pause on student
    loan payments increased the urgency to fix the program and to
    provide relief for millions of borrowers. Three months later,
    the student loan program is at a crossroads, and we should take
    advantage of the opportunity to make real change.
        The pause on student loan payments, interest, and
    collections that was put in place at the beginning of the
    pandemic is set to expire in about 2 months. This pause has
    shown how important it is to eliminate student debt. For some
    borrowers, the pause meant that they did not have to choose
    between food, rent, and paying student loan debt. For millions
    more, the pause gave them a chance to pay off other debt or
    even to put some savings aside. This was good for borrowers and
    good for our economy.
        Now the President should make these benefits permanent by
    using his authority to forgive $50,000 in student loan debt for
    all borrowers. In the meantime, it is critical that the
    Administration extend the payment pause, which is currently set
    to expire on September 30th.
        Earlier this month, I released the results of an
    investigation that found that student loan servicers were not
    ready for this pause to end. They need more time to connect
    with borrowers and more time to staff up to handle the needs of
    borrowers during the transition, and they are still waiting on
    important guidance from the Biden administration.
        Now there is a new set of complications that will take time
    to unravel. Two weeks ago, PHEAA, a large student loan servicer
    that has badly mismanaged the Public Service Loan Forgiveness
    Program, announced that they will be leaving the Federal
    student loan program. This is good news, very good news.
        PHEAA was responsible for failures in the Public Service
    Loan Forgiveness Program that have robbed untold numbers of
    borrowers of the debt cancellation that they were promised. The
    company has a nasty record of ripping off borrowers. Since
    2016, 9 different department reviews have uncovered problems
    with PHEAA's implementation of the program. PHEAA's problems
    were so extensive that they have been subject to four
    corrective action plans and two large fines.
        Despite these documented problems, when the company's CEO,
    James Steeley, appeared at our April hearing on student loans,
    he told what appeared to be a bald-faced lie about PHEAA's loan
    servicing record; he insisted that PHEAA had never been subject
    to department penalties. This was absolutely not true. When we
    learned about the actions taken by the Department of Education
    against PHEAA, Senator Kennedy and I sent a letter to Mr.
    Steeley, asking that he clarify the record. His response, which
    I am releasing today, is a mix of backsliding and denial that
    raises more questions than it answers.
        Senator Kennedy and I are from different parties, and we
    often hold different views, but we both believe in
    accountability. When a corporate CEO comes before our Committee
    to testify, we expect that person to be reasonably accurate
    and, if they make a mistake, to correct it as quickly as
    possible. Our job is oversight, and in this context it means
    that we have a responsibility to respond to misinformation and
    outright lies and to demand accountability for anyone who
    provides false and misleading testimony to Congress.
        As PHEAA leaves the student loan program, that is not the
    only problem we need to confront. Nearly 9 million borrowers
    will need to be transferred to a new servicer within a few
    months. This is no easy task, and the Administration has an
    important job to do to make sure that this transition happens
    smoothly.
        But this is also a rare opportunity for a fresh start and
    to make sure that the student loan program works the way it is
    supposed to. This is our best chance in years to build strong
    guardrails into student loan servicing contracts and to hold
    student loan servicers accountable if they screw things up. It
    is also a chance to fix the Public Service Loan Forgiveness
    Program, to make sure that our hardworking public servants get
    the relief that our Nation promised them.
        I appreciate our witnesses coming here today to give us
    perspective on how to make sure that that happens, and I will
    be working closely with the Education Department to provide
    student loan relief and to rebuild the student loan system so
    that it works in the best interest of borrowers.
        We have great witnesses with us today. First, joining us
    virtually, I am pleased to introduce the Honorable Tish James,
    the Attorney General for the State of New York. Attorney
    General James has been a fighter for student borrowers across
    her State, including bringing a case against PHEAA for its
    mismanagement of the Public Service Loan Forgiveness Program.
        Second, we have my good friend, Ms. Randi Weingarten, the
    President of the American Federation of Teachers. Ms.
    Weingarten represents more than a million public school
    teachers, nurses, and other dedicated public servants. She is a
    champion for debt relief on their behalf.
        And last, we have Ms. Persis Yu, the Director of Student
    Loan Borrower Assistance Project at the National Consumer Law
    Center. Ms. Yu is an expert on the student loan system and on
    consumer protection, and she is a tireless fighter on behalf of
    borrowers.
        I want to thank our witnesses for being with us today, and
    let us begin our testimony. Attorney General James, you are
    recognized for 5 minutes.

     STATEMENT OF LETITIA JAMES, ATTORNEY GENERAL FOR THE STATE OF
                                NEW YORK

        Ms. James. Thank you, Madam Chair, and thank you for
    allowing me to testify virtually. I truly appreciate it.
        My name is Letitia James, and I am the Attorney General for
    the State of New York. Thank you for inviting me here today to
    discuss the challenges facing student loan borrowers and ways
    to protect them.
        Our office has significant experience protecting student
    loan borrowers based on our enforcement of State and Federal
    consumer protection laws. Since 2019, we have undertaken major
    investigations and actions against for-profit college, student
    lenders, and student loan servicers. Our work resulted in a $9
    million settlement with Federal student loan servicer conduit,
    formerly known as ACS, that provided relief to more than 40,000
    New York borrowers, $7.5 million in debt relief to more than
    900 New York students at the now defunct for-profit college,
    ITT Tech, and a settlement with Transworld Systems, a student
    loan debt collector, which resulted in $600,000 in restitution
    and penalties.
        Our investigations have revealed that student loan
    borrowers are being harmed by the misconduct of student loan
    servicers. In fact in October 2019, my office filed a lawsuit
    against the Pennsylvania Higher Education Assistance Agency,
    PHEAA, one of the Nation's largest student loan servicers, for
    its mismanagement of the Public Service Loan Forgiveness
    Program. This program allows individuals who work in public
    service, like teachers and nurses and members of the Armed
    Forces, to have their loans forgiven after making qualifying
    payments for 10 years.
        And as we allege in our lawsuit, PHEAA, operating under the
    name, FedLoan Servicing, failed these hardworking people by not
    accurately counting PSLF qualifying payments, failing to
    provide timely explanations of their determinations, and
    failing to inform borrowers of their options to challenge
    FedLoan's mistakes. As set forth in our lawsuit, FedLoan's
    inability to properly administer the program contributed to the
    shockingly high rate of rejection of PSLF forgiveness
    applications. When we filed our lawsuit, more than 98 percent
    of the applications were rejected as ineligible for
    forgiveness.
        And PHEAA recently announced, as you indicated, Madam
    Chair, that it will not be renewing its contract with the
    Department of Education. However, State and Federal
    investigations have revealed that servicer misconduct extends
    beyond a single servicer. The widespread misconduct stems in
    part from the absence of comprehensive Federal servicing
    standards.
        To prevent misconduct from continuing, the Department
    should implement such standards, including requiring servicers
    to provide accurate and timely information about income-driven
    repayment plans and public student loan forgiveness
    eligibility, requiring servicers to act in the best interest of
    borrowers, imposing robust quality assurance measures,
    implementing mechanisms for borrowers to appeal servicer
    actions, requiring timely processing of borrower submissions,
    and penalizing servicers who violate State and Federal consumer
    protection laws, including by reallocating the Federal student
    loan portfolio to other servicers.
        In addition, the Department of Education should provide
    relief to borrowers who have been harmed by servicer
    misconduct, including by retroactively crediting public student
    loan forgiveness borrowers with qualifying payments. The
    Department should also ensure that the onus is on the servicer,
    not the borrower, to identify and correct servicer error. In
    addition, where State and Federal investigations reveal
    systemic errors, the Department should provide broad, across-
    the-board relief to harmed borrowers.
        The Department should also continue its work to reverse
    former Secretary DeVos's action to shield Federal servicers
    from State oversight. We applaud the Department for taking
    steps to restore information sharing with State attorney
    general offices. The Department should also retract the former
    Secretary's March 2018 notice that stated the position that
    State consumer protection laws are preempted by Federal law
    with respect to Federal loan servicers. Retracting this ill-
    conceived notice will assure that States can continue their
    important work to protect borrowers in our States.
        In addition, Congress should expand access to public
    student loan forgiveness to all Federal loan borrowers who
    devote 10 years to public service regardless of the type of
    Federal loan or loan repayment plan. Expanding eligibility to
    encompass all such borrowers will provide relief to many who
    were victims of servicer error and will result in a fairer,
    more consistent, and more equitable public student loan
    forgiveness program.
        And finally, the Federal Government should take action to
    cancel a substantial amount of Federal student debt. I co-led a
    multistate coalition of 17 attorneys general, urging the
    adoption of House and Senate resolutions that call for the
    cancellation of up to $50,000 in Federal student debt for all
    Federal student loan borrowers. Canceling this debt will help
    free borrowers burdened by loan payments and allow them to move
    forward with their lives as well as help to close the racial
    and gender wealth gap.
        The student debt crisis has been exasperated by misconduct
    by student loan servicers. It is imperative that we create
    safeguards--rail guards, as you indicated--that protect
    students from servicer misconduct, especially students who work
    and who have made a commitment to the public good benefit that
    all of us enjoy. My office is committed to protecting students
    and student borrowers in New York State and across this
    country, and I thank you for allowing me the opportunity to
    testify today.
        Chair Warren. Thank you very much, General James. We really
    appreciate it.
        President Weingarten, you are recognized for 5 minutes.

     STATEMENT OF RANDI WEINGARTEN, PRESIDENT, AMERICAN FEDERATION
                              OF TEACHERS

        Ms. Weingarten. Thank you, Senator.
        [Audio interruption.]
        Ms. Weingarten. Good afternoon. My name is Randi
    Weingarten, and I am the President of the American Federation
    of Teachers, and I am honored to be testifying before this
    Committee on this topic. Our union represents 1.7 million
    teachers and paraprofessionals, nurses, higher education
    faculty and staff, and public employees. In other words, we
    represent and work in the professions that make a difference in
    the lives of others, professions that require a college degree,
    which means our members have been increasingly burdened by
    unsustainable college debt.
        Over the last year-and-a-half, members of these very
    professions have done heroic work, keeping our communities up
    and running, caring for COVID patients, and educating our
    children during a school year like no other. Our teachers and
    school staff from pre-K through college are planning right now
    a full return to in-person learning, and they know they will
    need to make their students feel safe and welcome amid the
    myriad of crises that are facing the Nation right now. And
    frankly, the survey we did with the RAND Corporation this
    summer showed that 78 percent of teachers report experiencing
    frequent job-related stress during this pandemic, almost twice
    as much as other working adults. So for now, for many of them,
    the looming restart of student loan payments in this fall is
    deeply concerning and potentially ruinous financially, as you
    said, Chair Warren.
        So I am here on their behalf to raise these concerns,
    especially in light of the news that PHEAA will no longer
    service student loans. Most AFT members are eligible for PSLF,
    but after 3\1/2\ years, the Education Department is still
    rejecting 98 percent of applications and has nearly 150,000
    PSLF applications in backlog. What AG James just said is true
    across the board.
        The Biden administration inherited a broken system and
    wisely extended the pause on student debt that the Trump
    administration enacted. Combined, the two have effectively
    canceled over $90 billion in student loan interest, showing
    that the Administration can cancel student debt. The Biden
    administration and the Education Department can restore the
    promise of PSLF right now before student loan payments resume
    this September and immediately discharge debts for all
    borrowers who have completed at least a decade of public
    service while paying their Federal student loans.
        Borrowers need relief, not a mirage. They need help from a
    Government that promised to forgive the remainder of any debt
    still unpaid after 10 years of payments if they went into
    public service. Public service work is valuable and should not
    lead to a lifetime of debt that forced people to make--forced
    them into terrible decisions about whether to pay their loans
    or buy a home or raise a family.
        Let me give you one example in the short time I have left:
    Christine Conlon, a school-based occupational therapist in
    Staten Island, New York. For years, Christine kept detailed
    notes about her student loan payments, but she could not get
    PHEAA to reconcile its records with the evidence she repeatedly
    provided them. She should be just a few years away from PSLF if
    not for the problem of PHEAA, but PHEAA will not--they have
    lied repeatedly to her, including telling her she should just
    give up on public service loan forgiveness.
        Look, the AFT has made extraordinary efforts, as you all
    know, to make PSLF work, including going to court to seek
    justice that our members need. And while servicer errors have
    plagued the PSLF program for years, this has become blindingly
    apparent during the last Administration.
        I know, and I am glad, that the Biden-Harris administration
    seems primed to hold servicers accountable, like PHEAA, but
    what we are seeing is that they are running for the doors
    because they know how catastrophic they have been. If the
    Administration does not cancel student debt for public service
    workers before the fall, millions of them will be forced to
    transfer the loans that PHEAA currently has to no servicers and
    the new servicers will inherit loans with paper trails that
    will never be able to be untangled.
        The problem is clear. The solutions are clear as well. The
    Administration should cancel debt for all public service
    workers who have paid their debts for a decade and should
    cancel the debt of $50,000 of debt per borrower for the
    following reasons: These actions will make a big difference for
    all communities, particularly communities of color. Ninety-
    three percent of the lowest-income Black households hold
    student debt, and they would experience substantial relief. In
    fact, debt cancellation would be an immediate and long-lasting
    stimulus to our economy, increasing average yearly pay by
    $3,000, and increasing the gross domestic product by $1
    trillion.
        We know that the Ed Department is trying, but right now is
    the moment to cancel up to $50,000 of debt and to do the work
    that we need to do to fix PSLF in the future. Thank you.
        Chair Warren. Thank you, President Weingarten.
        Ms. Yu, you are recognized for 5 minutes.

        STATEMENT OF PERSIS YU, DIRECTOR, STUDENT LOAN BORROWER
            ASSISTANCE PROJECT, NATIONAL CONSUMER LAW CENTER

        Ms. Yu. Good afternoon. Chairwoman Warren, Members of the
    Committee, thank you for inviting me to testify today regarding
    how to protect student loan borrowers in the upcoming
    transitions in the student loan system. My name is Persis Yu. I
    am the Director of the National Consumer Law Center's Student
    Loan Borrower Assistance Project, and I offer my testimony here
    today on behalf of our low-income clients of the National
    Consumer Law Center.
        Our clients and millions of others like them take out
    student loans believing that they are the key to a better
    future. The vast majority of clients that I see are low-income
    women of color, who wanted to provide a better life for their
    children but are stuck instead in a cycle of inescapable debt.
        The student loan system is broken and has been broken for a
    very long time. Currently, in the United States, nearly 45
    million people owe more than $1.7 trillion on their student
    loans. Prior to the pandemic, roughly a quarter of Federal loan
    borrowers were delinquent or in default on their loans. Racial
    disparities in the student loan portfolio threaten the
    financial security of borrowers of color, with Black and Latinx
    borrowers defaulting at twice the rate of their White peers.
    Cruelly, the communities hit hardest by the student loan crisis
    are also the communities hit the hardest by the pandemic.
        The COVID-19 payment suspension, which provided vital
    protections to many of our clients throughout the pandemic, is
    currently set to expire on September 30th, just a few short
    months away. And on top of this looming deadline, two of the
    Department of Education's loan servicers, PHEAA and also
    Granite State servicers, have announced they will not be
    extending their contracts this December, meaning that roughly
    10 million borrowers will need to transfer their loan
    servicers.
        Student loan borrowers, low-income and otherwise vulnerable
    borrowers in particular, are at significant risk during these
    upcoming transitions. The combination of restarting payments
    along with the risks associated with large-scale loan transfers
    by servicers who have a long history of failing to adequate
    serve student loan borrowers will have dire consequences unless
    meaningful consumer protections are put in place to protect
    these borrowers.
        The end of the COVID-19 payment suspension, on its own,
    poses unprecedented challenges and is fraught with risk.
    Historical data from the Department shows that default rates
    typically spike following disaster-related forbearances. My
    clients and others like them face severe consequences if they
    default on their Federal student loans. The punitive collection
    tactics, such as wage garnishment, Social Security offsets, and
    tax refund offsets, often push low-income households to or even
    over the financial brink.
        I have heard from hundreds of borrowers who have lost their
    earned income tax credits and child tax credits due to default
    on their Federal student loans. These payments are designed to
    support families and lift millions of children out of poverty,
    but if a family has experienced student loan default, these
    payments may be seized in their entirety. The loss of the EITC
    and the CTC is devastating to my clients and their families. I
    have had clients unable to access stable housing. I have had
    clients unable to buy diapers, food, basic necessities for
    their children because of these offsets. Simply put, the
    student debt crisis was hampering our families' economic
    stability even before the pandemic.
        Notably, there are already approximately 9 million
    borrowers in default on their--on their student loans. The
    Department should immediately remove these borrowers from
    default. Otherwise, they will be subject to the Government's
    draconian collection powers as soon as the suspension ends.
        As the Department restarts payments for tens of millions of
    student loan borrowers, high-quality servicing is paramount.
    Getting borrowers into an affordable income-driven payment
    plan, or IDR, will be particularly important for ensuring
    borrowers' success. But starting repayment while also
    simultaneously transferring roughly 10 million borrowers will
    make this goal nearly impossible. The consequences of this
    massive and imminent transfer will impact all borrowers in the
    Department's loan portfolio.
        The remaining servicers will need to rapidly staff up and
    train a whole cadre of customer service representatives in a
    very short amount of time in order to absorb the accounts of
    nearly a third of the direct loan portfolio. At a time when two
    major changes are occurring for student loan borrowers,
    borrowers need the best servicing possible. Instead, they will
    likely receive--they will likely encounter inexperienced
    customer service representatives and servicers who are
    stretched too thin. Even in ordinary circumstances, errors in
    student loan servicing are common and often result in borrowers
    missing out on relief programs or on qualifying payments for
    IDR or PSLF. These mistakes cause borrowers to pay more and for
    a longer period of time.
        Fairness and justice require that these borrowers have the
    ability to enforce their rights when breached by servicers and
    obtain adequate remedies. Policymakers must also recognize that
    for many borrowers the harm from a bungled transition will come
    on top of years, if not decades, of financial distress and
    dreams postponed as a result of our broken student loan system.
        Widespread administrative debt cancellation is needed now.
    The student loan system has failed borrowers for too long. In
    addition to widespread administrative debt cancellation, the
    Department should clear the books of borrowers who are unlikely
    to ever repay their debts and automatically provide relief to
    all of the borrowers who are already entitled to cancellation
    under law. In addition to providing much-needed relief to these
    borrowers, if done prior to the restart of repayments, these
    steps will eliminate the debts of many of the hardest to reach
    borrowers and will allow servicers to dedicate their resources
    to ensuring the success of the remaining borrowers.
        Thank you for the close attention you are paying to
    protecting student loan borrowers in the upcoming transitions
    and for the opportunity to provide this testimony. I look
    forward to your questions.
        Chair Warren. Thank you very much. I Appreciate all of your
    testimony here.
        So I now yield to myself for 5 minutes of questions. The
    first hearing that we held in this Subcommittee just a few
    months ago focused on student loan servicers. These are the
    private companies that manage student loans for the Federal
    Government. During that hearing, I asked the CEO of PHEAA, one
    of the largest servicers in the country, whether the Department
    of Education had ever penalized his company in any way for its
    blatant mismanagement of the Public Service Loan Forgiveness
    Program or PSLF. He told me, ``No, they have not,'' but it
    turns out that was not true.
        After the hearing, the Department of Education sent Senator
    Kennedy and me a letter detailing the multiple penalties PHEAA
    has faced. So Senator Kennedy and I wrote to PHEAA's CEO,
    asking him why he had lied to Congress. Two weeks later, PHEAA
    announced they would be quitting the student loan program when
    their contract expires in December.
        Attorney General James, your office has had multiple
    dealings with PHEAA, including suing them for mismanaging the
    Public Service Loan Forgiveness Program. Based on what you have
    seen in New York, are you sorry to see PHEAA quit the student
    loan program?
        Ms. James. I think PHEAA's exit is an opportunity for a
    fresh start. As we allege in our lawsuit, PHEAA failed the
    teachers, the nurses, the social workers, those who serviced in
    the military by failing to accurately count these qualifying
    payments, failing to provide timely explanations of their
    determinations, failing to inform borrowers of their options to
    challenge their mistakes. Public workers who fulfill their
    obligations to the public should be able to get the debt relief
    they earn, and we are hopeful that the Department of Education
    will work with our office and other State and Federal partners
    to ensure that in the future that the public student loan
    forgiveness program fulfills its promise.
        Our case, as you know, is in the midst of discovery, and we
    will continue our litigation and hopefully get the relief that
    countless number of borrowers so desperately need, not only in
    New York but all across the country.
        Chair Warren. Thank you. You know, I think we all know what
    happened here. PHEAA realized that Congress and the Department
    of Education and the attorneys general were finally starting to
    hold them accountable for cheating borrowers and lying about
    it, so they turned and ran. I am glad they are gone. All 8.5
    million of the accounts that PHEAA currently handles now must
    be turned over to the student loan servicers.
        Ms. Yu, did the contract that PHEAA has with the Department
    of Education have any requirements in it obligating PHEAA to
    protect borrowers if they suddenly decided to quit?
        Ms. Yu. The contracts provide no meaningful requirements to
    borrowers in the case that they suddenly decide to quit, and
    importantly, they do not provide the meaningful relief to the
    borrowers if they get harmed, as indicated by General James.
        Chair Warren. OK. So let us talk a little bit about that.
    The Department is currently negotiating with PHEAA over what
    they need to do when PHEAA walks away. What specifically do you
    think the Department of Education should require from PHEAA to
    make sure that student loan borrowers are not hurt even more
    during the transition to a new servicer?
        Ms. Yu. Well, first of all, we need to learn from the
    lessons of the transfer from ACS a number of years ago. We need
    to learn that borrowers must have complete and full payment
    histories, and that includes the payment histories from prior
    servicers as well as the payment histories when the borrower is
    with PHEAA. They need to also transfer any records of
    complaints, any information where borrowers may have disputes
    about the loan system as well. And we need to be proactive
    about identifying vulnerable borrowers who might get lost in
    this transfer. But, critically, we need to understand that
    inevitably some borrowers will get harmed in this transfer, and
    we need to make sure that we have adequate remedies available
    to those borrowers.
        Chair Warren. I think that is a really important point. You
    know, President Weingarten made the point that PHEAA has done
    such a bad job of accounting for the loan payments that people
    have been making, but expecting them suddenly to have 100
    percent compliance when they make the transition, and they are
    not even going to stay in the business is pretty unrealistic. I
    thought you made a very powerful point about that.
        Look, our student loan system is broken more than just
    PHEAA. I have been saying for years that the Department of
    Education needs to do more to hold all student loan servicers
    accountable when they break the law or when they hurt
    borrowers, and for years the excuse has been that there is no
    alternative to working with these incompetent companies because
    there is no plan for how to get by without them. Contracts get
    renewed year after year after year, with no accountability and
    no consequences for bad behavior and zero provisions about what
    the companies would do if they went under or if they walked
    away. When the Federal Government props up companies like that,
    that is the definition of ``too big to fail.''
        Now in December, all of our servicer contracts will be up
    for renewal, not just PHEAA's but all of them, which means that
    right now the Department of Education is negotiating over what
    conditions these companies will have to agree to in order to
    keep making money off the student loan borrowers.
        Ms. Yu, what would loan servicing contracts with real teeth
    to protect our students look like?
        Ms. Yu. Yeah, thank you for your question. There needs to
    be real penalties for poor performance and abuse practices, and
    the Department needs to proactively look for those and do
    screenings. But the Department also needs to get out of the way
    of State attorneys general, like General James. And for private
    borrowers who are seeking relief using the State consumer
    protection laws, they need to rescind the notice on preemption
    that Attorney General James mentioned before but also prevent
    servicers from raising defenses such as preemption or
    derivative sovereign immunity, which are intended to shield
    them from liability and prevent them from giving borrowers real
    relief.
        Chair Warren. Thank you. We need to get control of our
    broken loan servicing system so that we never end up in this
    situations again. Right now, the incentives in the servicers'
    contracts are not strong enough to get them to change their
    behavior, and the penalties are nothing more than a slap on the
    wrist when the companies injure student loan borrowers. We have
    an opportunity over the next year to write new rules that will
    tell servicers that if they do a great job servicing the
    borrowers then they will be rewarded and if they mislead the
    borrowers or break the law then they are out. That is fair for
    everyone.
        I now recognize Senator Reed for his questions.
        Senator Reed. Thank you very much, Madam Chairman, and
    welcome to the witnesses.
        I must first recognize one of the AFT attendees, Sarah
    Tammelleo. I first met Sarah more than 30 years ago when she
    was in grammar school. She was handing out brochures for Jack
    Reed at a polling place at Park View Junior High School in
    Cranston, Rhode Island. Nice to see you again. And because of
    you I am here, and I do not blame you. I do not blame you.
        This is absolutely critical, and the Chair has raised a
    number of important issues. One legislative initiative I have
    been working on for years is to have those lenders with high
    default rates share the cost on a graduated basis, which I
    think will ensure that they provide the sort of loans for
    education that will lead to real jobs and real pay and the
    ability to pay back the loans. That is just one aspect. That
    might even be in the contract, I hope, negotiations that are
    going in now.
        But one of the areas--and I thought I would get President
    Weingarten's comments on this--is the educator pipeline. We
    need more educators. We have to have legislation that addresses
    this program, that touches capacity at the lower levels of
    communities, States, et cetera. One of the ideas we are talking
    about is doubling or increasing the TEACH grant to $8,000 per
    year and make it easier for educators to complete and get their
    credit.
        As you have talked about, we have to make loan forgiveness
    simpler. I believe it should be not at the end of 5 or 10
    years, but it should be progressive throughout your period of
    time so that in fact you can see some real tangible benefits
    early in terms of the commitment to public service.
        Any comments, President Weingarten?
        Ms. Weingarten. Thank you, Senator. So there are many
    things that could help solve the problems of how do we recruit
    and retain people in public service, people in teaching, and
    the TEACH grants are part of that, the doubling of Title I.
        Senator Van Hollen has had this great idea about the PACT
    Act in terms of how you increase both Title I and IDEA in a way
    that schools with kids with special needs or schools with kids
    who are poor or impoverished, they have a long--they have an
    understandable and tangible Federal investment that you can
    count on over multiple years, so you change the conditions in
    schools and people want to be in those schools. Parents want to
    send their kids there. Teachers want to teach there. Kids
    thrive there. So there is lots of different ways to try to
    recruit and retain over the long period of time.
        The dilemma right now is that with the pause ending in---
    you know, in less--essentially, in less than 2 months, what is
    happening is that there is going to be this jolt on people. And
    none of the changes that were supposed to be made to make PSLF
    more functionable, more available, they have not happened yet.
    So you are going to have people who are all of a sudden going
    to be paying 400, 500, 800, 1,000 dollars a month at the same
    time as all of these existing problems still exist. So--and at
    the same time as they are going back to school for the first
    time, with a Delta variant and things like that.
        So that is why this urgency right now is so important in
    the short term as well as then dealing with your ideas for
    residencies, your ideas for how we recruit and retain,
    including the TEACH grants, for the longer term.
        Senator Reed. Thank you very much. And just a quick slight
    detour, I think very slight. School infrastructure is one of
    the major issues that I have been trying to advance in our
    various proposals for Rebuild America.
        Just a quick comment, President Weingarten, the schools in
    most communities are old and need a lot of work, and if we do
    not provide the resources, it goes to your point about why
    would a child want to go to a place that just does not work.
    And some of our communities keep the windows open all winter
    and children in coats so they could just stay in the classroom.
    I presume that you would strongly support this effort.
        Ms. Weingarten. I would strongly support this effort. Let
    me just give you this one example of this amazing school in New
    York City, Martin Luther King High School. The ventilation
    system never worked. Never worked. And with the CARES Act money
    that you helped get us--that you helped get us, we were able to
    work with the private sector to figure out why the ventilation
    system did not work. This school was built in the 1970s.
        I was the president of the teachers union in New York City
    for 10 years. I could not get the ventilation system to work.
    The CARES Act money, the work with a focus on ventilation, you
    walk into that school now, you can breathe. I am an asthmatic.
    I could breathe with a mask on. Could you imagine what that
    means for the thousands of kids who go into that school?
        And that is the kind of work that we need all throughout
    the country. Two-thirds of the country has ventilation systems
    in schools that are not appropriate. We need that money for
    infrastructure. It will create jobs. It will help kids breathe.
    And it will help us have a safe return to schooling this fall.
        Senator Reed. Thank you very much. Thank you, Madam
    Chairman.
        Chair Warren. Thank you, Senator Reed.
        Senator Van Hollen.
        Senator Van Hollen. Thank you. Thank you, Madam Chairman.
    Thank you for holding another hearing on this important issue,
    and thank you to all our witnesses for your efforts to make
    sure that we ultimately uphold the promise of the Public
    Service Loan Forgiveness Program.
        And, President Weingarten, thank you for mentioning the
    Keep Our Promises to America's Children and Teachers Act. With
    your help, we will get it over the finish line. And I was
    pleased to see the President's budget requests for both Title I
    and for IDEA. We need to make sure that is something that stays
    with us over the years.
        So you know, I represent a State where we have lots of
    folks who are engaged in public service, either Federal
    employees, of course, like other States, State employees, lots
    of nonprofit professionals. And they all were hoping to be
    beneficiaries of this program, this loan forgiveness program
    for public service, when they embarked on those careers, only
    to find out in many circumstances that they were at a dead end
    for various reasons. And we have all heard the very startling
    figure of the 98 percent denial rate, and we have got to turn
    that around.
        Attorney General James, thank you for all your efforts with
    respect to PHEAA and your lawsuit against PHEAA. Where do you
    think we can go from here in terms of remedy, and what
    administrative actions can the Biden administration take to
    help supply a remedy?
        Ms. James. Well, hopefully going forward, as they renew
    these contracts with the servicers, again requiring servicers
    to provide accurate and timely information about income-driven
    repayment plans and eligibility, requiring servicers to act in
    the best interest of borrowers and not the servicers
    themselves, imposing robust quality assurance measures,
    implementing mechanisms to borrowers to appeal servicer
    actions.
        Making--streamlining the process is so critically
    important. Staffing up is important. Requiring a timely
    processing of their submissions of the applications and again
    penalizing servicers who violate State and Federal law is so
    critically important. But also, just expanding the Public
    Service Loan Forgiveness Program to other Federal student loan
    borrowers would also be helpful.
        It is important to note that there are 45 million student
    loan borrowers in this country. We are only second in consumer
    loans to mortgages. And it is really critically important that
    we help Americans and that we ensure that these servicers are
    working in the best interest of borrowers, and that is so
    critically important.
        And last, as was mentioned by my colleagues, we need to
    extend the pause period, particularly during this epidemic and
    as we face new dangers. It is important that individuals have
    an opportunity to get back on track and that individuals are
    put in a position so they can pay their debt in a fashion and
    in a manner and in a time when it is most appropriate to them.
        Senator Van Hollen. Well, thank you for your good work in
    this area.
        And, Ms. Yu, thank you and the National Consumer Law Center
    for the work that you have been doing. And I saw that, together
    with the Center for Responsible Lending, you looked at some of
    the Department of Education borrowers, 428,000-plus, that were
    serviced by Navient, who collectively owe over $28 billion. And
    as I understand, the analysis that showed nearly two-thirds of
    these borrowers, who made payments during COVID, still had not
    paid--been able to repay dollar one of their principal, so they
    were underwater in that sense, and that, of those, almost
    90,000 borrowers owe more than 125 percent of their original
    balance now.
        So how much of this is due, in your opinion, to the
    servicer sort of malfeasance and outright negligence? And how
    do we fix this problem going forward?
        Ms. Yu. Thank you for your question, Senator. Servicer
    abuses absolutely keep borrowers out of affordable repayment
    plans which allow them to make progress on their student loans.
    When servicers--one of the very common problems that we see is
    that servicers steer borrowers into costly deferments and
    forbearances. And what that does is interest continues to
    accrue, and then after that interest accrues, it is
    capitalized. So we see that not only are borrowers being
    charged interest, but they are being charged on top of
    interest.
        We see actions by State attorneys general, by the CFPB, to
    hold servicers accountable for those actions, but we also
    need--we need more of those actions. We need the Department to
    take proactive steps to remedy that. But we also need to see
    borrowers given retroactive credit for the payments that they
    should have been able to make, and we need to see servicers
    held more accountable and to pay borrowers restitution for
    those--for those harms.
        Senator Van Hollen. Well, thank you. I look forward to
    working with all of you and Senator Warren and Members of the
    Committee to try to make this right for these students and
    borrowers. Thank you.
        Chair Warren. Thank you, Senator Van Hollen.
        Senator Smith.
        Senator Smith. Thank you so much, Chair Warren. Sounds
    great. And I really appreciate our testifiers who are here
    today.
        So the student debt crisis is out of control. We know this,
    and we have had an opportunity to really explore it during this
    hearing and the last hearing we held earlier this year. And I
    can tell you I hear from Minnesotans, my constituents, about
    this all the time. People that are struggling to carry student
    loan debt. This debt which is stifling their opportunity to
    become entrepreneurs or innovators or public servants, which is
    what they want to do. And this is bad.
        But what is worse is that borrowers who worked hard, who
    have made major life decisions, like committing to public
    service, and then in return not seeing that promised loan
    forgiveness that led them to make these decisions to begin
    with, only to find that because of some bureaucratic SNAFU they
    are not eligible, apparently, for student loan forgiveness at
    all.
        So this kind of debt relief would open the door for
    millions of Americans to have the freedom and the opportunity
    to build the lives that they want. And that is why it is so
    important that the Federal Government address this challenge
    and, I think, forgive up to $50,000 of student loan debt.
        Now, President Weingarten, I have heard from many
    Minnesotans, including of course many educators, about their
    struggles with the Public Service Loan Forgiveness Program. And
    as I said, they have done everything they have been asked to
    do, only to find that the servicer tells them everything is
    fine, everything is fine, until it is not fine. After years of
    making payments, they discover that they are not eligible for
    getting their remaining student loans forgiven.
        So I would like to ask you about a specific piece of this.
    You and I have spoken many times about the challenges of
    recruiting and retaining teachers, especially teachers of
    color. Can you tell me how you think these deep challenges with
    the public loan forgiveness program is affecting our challenges
    around recruiting and retaining teachers and what difference it
    would make if we fix this?
        Ms. Weingarten. So let me give you the example of one of
    the plaintiffs in a case that we have, who is a Minnesotan,
    Janelle Manzel, who could have had lots of other opportunities
    in her life. She is a math teacher. She decided to teach in the
    public schools in Minnesota, and she taught for 10 years, paid
    her student loans every month, and when it was time to get
    PSLF, she was given the royal runaround by her servicer and
    told that none of the payments qualified. Anyone who hears that
    story says, why would I become a teacher?
        And that story just runs rampant, not only through
    Minnesota but, as AG James could tell you, through New York. AG
    Stein from--could tell you from North Carolina. It is--it is
    why all these AGs have been out there trying to help all of us
    vindicate rights for people who have done everything right. And
    if we are trying to attract people into our profession, who do
    not come with a wealthy nest egg, they need the salary that
    they are making to actually make ends meet.
        Senator Smith. Right.
        Ms. Weingarten. And they had this promise of PSLF, and then
    they are told that they cannot get it. It says lots of things
    about Government inaction in so many different----
        Senator Smith. Right. Well, and it says so much about the
    promise of valuing teachers, the thanks that we give to
    teachers. But then are we going to put any beef behind that?
    Are we going to actually put our shoulder into demonstrating
    that respect and not only just talking about it?
        Ms. Weingarten. And let me say one more thing, which is
    that if this was in the financial markets and someone had a
    contract and that said that if you did X you will get Y, they
    would get Y.
        Senator Smith. Yes.
        Ms. Weingarten. The fact that we have such disrespect for
    this contract is part of the disrespect of public service, of
    nurses, of firefighters, and of teachers.
        Senator Smith. Yes, yes. Thank you for that.
        And I want to just--I have just a couple seconds left, but
    I want to go to Ms. Yu to actually follow up on something
    because when Chair Warren held the earlier hearing we heard
    from an individual who was struggling under student loan debt,
    trying to do everything that she could possibly do for her
    family and just literally sinking under this debt.
        I can hear sort of the challenge that some people would say
    here. They would essentially say--they would argue that
    providing student loan forgiveness to people like this, it is
    almost like a moral hazard, that you are rewarding people for
    not living up to their obligations. I am wondering, thinking
    about the clients that you serve, how you respond to that
    argument.
        Ms. Yu. Thank you. Thank you for your question, Senator.
    Look, we have a student loan system that is broken and has been
    holding our student loan borrowers back. Our system gives our
    borrowers very few opportunities to succeed and hammers them
    really hard anytime that they fail. We take their wages without
    a court order. We take their Social Security benefits. We are
    taking their earned income tax credit and their child tax
    credits, which are designed to lift their families out of
    poverty. We are hammering student loan borrowers, and we are
    making it really hard for them to succeed.
        Senator Smith. Thank you so much. I appreciate it.
        Thank you, Madam Chair.
        Chair Warren. Thank you, Senator Smith. I think that your
    question is right on target, that there are some who are
    willing to criticize people whose big sin was that they tried
    to get an education and now they are in financial trouble and
    cannot pay back the student loan debt and to hold them
    accountable, but then an organization like PHEAA, that has made
    millions and millions of dollars off this system, cannot even
    account for the payments that have come in, which goes to
    President Weingarten's point. How long would a credit card
    company last if it was not accounting for the payments that
    came in, or a mortgage loan company, and yet these student loan
    servicers keep getting their contracts renewed? I think we see
    why PHEAA decided that maybe it was a new day in Washington and
    a new day at the Department of Education and decided to tuck
    tail on this one and run.
        Senator Menendez, are you ready yet, or would you like me
    to start with Senator Ossoff?
        [No response.]
        Chair Warren. Senator Ossoff.
        Senator Ossoff. Thank you, Madam Chair. Thank you for your
    consistent attention to this issue. Thank you to our panelists.
        Ms. Weingarten, regarding Public Service Loan Forgiveness,
    a promise was made to America's teachers. Is that not right?
        Ms. Weingarten. Yes, Senator.
        Senator Ossoff. And what was that promise?
        Ms. Weingarten. The promise that was made--by the way, a
    bipartisan promise in 2007--was that in exchange for working in
    public service, teaching, nursing, firefighting, the Army, and
    paying your student loans for 10 years, the rest of those
    student loans would be forgiven. And it was a pretty simple
    promise. And it was done, as I said before, in a bipartisan
    way, to try and make clear that the United States valued this
    kind of public service. And while you may not get paid what you
    are worth, you certainly would be able to afford the education
    that was required for this kind of public service.
        Senator Ossoff. A bipartisan promise made to America's
    teachers, to servicemembers, to others who take on public
    service, who pay their loans diligently for a decade.
        Ms. Weingarten. Correct.
        Senator Ossoff. And in exchange for that service, this
    bipartisan promise was the prospect of the forgiveness of the
    remainder of their loans at the end of that decade. Is the U.S.
    Government making good on that promise?
        Ms. Weingarten. No. I mean, the--you know. Look, the Biden
    administration inherited a mess. The first year that we would
    have seen real making good on that promise was 2017. And the
    former Secretary of Education, Betsy DeVos, made that worse,
    not better, and then made it hard for anyone else, including
    attorney generals across the country or someone's--or a
    member's union to try to vindicate their rights, as the
    testimony of my colleagues have made so clear earlier today.
        The dilemma now is that there is such a backlog in the kind
    of cases that have come up to be redeemed under PSLF that no
    Administration, as good as the Biden administration is, is
    going to be able to get through a backlog of 150,000 cases and
    then on top of that every new case that comes in every day. And
    so what we are seeing is we are still seeing a huge fail rate
    in terms of not being able to redeem this basic promise, a fail
    rate of about 98 percent.
        Senator Ossoff. Well, I know the Chair is committed to
    this, and we have to make good on this bipartisan promise made
    to teachers and others who serve 10 years of diligent
    repayment, 10 years of service, that their student loan debt
    would be forgiven for that service. And I am ready to work with
    you, Madam Chair, to take the action necessary to make that
    happen.
        I want to ask you, Ms. Yu, about college affordability. My
    personal belief is that you should not have to take on a penny
    of debt to get a degree from a public college in this country
    or to get a degree from a HBCU in this country. The kind of
    opportunity that access to public college and HBCU education,
    without debt, would make for the people of Georgia would be
    extraordinary. And that is why I am advocating now that this
    Congress act to expand the Pell Grant program, to make higher
    education accessible to all Americans through our public
    colleges and HBCUs, without debt. What kind of a difference
    would expansion of the Pell Grant program make, for example, to
    the folks the organization serves?
        Ms. Yu. It would make a huge difference. We absolutely need
    to move away from a system of financing higher education
    through debt. Debt is holding back my clients. It is keeping
    them from being able to fulfill the promises. It also allows
    them to take the chance on an education. Right? Like, that is
    one of the problems that our clients see is that they are
    trying; they are trying, and some of them do not succeed.
        And we need to lower the risks of attempting to improve
    your lives and make--you know, get an education and have an
    opportunity to feed your family. We need to lower the risks. We
    need to move away from debt-financed higher education.
        Senator Ossoff. And, Ms. Yu, expanding opportunity can also
    mean expanding access to skills, job training, vocational
    training. And just as I believe that you should not have to
    take on debt to get a 4-year degree from a public college, I
    think we should be working to make access to job training and
    vocational skills free in this country. We have a national
    interest in having a highly skilled workforce, and there are so
    many people in Georgia and across the country for whom an HVAC
    certificate, a welding certificate, a commercial driving
    license is the ticket to a middle-class standard of living.
    What kind of a difference would it make in communities across
    this country to offer free job training and vocational
    training?
        Ms. Yu. That would make a huge difference.
        Senator Ossoff. Thank you, Ms. Yu.
        I yield back, Madam Chair.
        Chair Warren. Thank you, Senator Ossoff.
        Senator Menendez.
        Senator Menendez. Well, thank you, Madam Chair. First of
    all, I want to really thank you for the incredible, fierce
    advocacy that you have had in this regard in the way you view
    the Subcommittee. And I am pleased to be allowed to join, as a
    Member of the full Committee, you today.
        And of course, it seems to me that the best way to protect
    student loan borrowers is to forgive student loan debt, and I
    am pleased to be working with the Chair, Senator Schumer, and
    others to achieve that.
        But I would like to focus on the impact of PHEAA's upcoming
    student loan service transfer will have in my view. An already
    beleaguered program, the Public Service Loan Forgiveness
    Program, I think is going to be further beset by this transfer.
    So, Attorney General James, can you tell me any lessons that
    you learned from previous Federal Loan transfers?
        Ms. James. Well, thank you, Senator, for that question. The
    last Federal loan portfolio, the transfer provided valuable
    lessons that all of us should learn from. In 2013, the Federal
    loan servicer known as ACS, now known as Conduent, lost its
    contract to service Federal direct loans and transferred
    millions of loans to other servicers. And when ACS transferred
    its portfolio, many of the now servicers found that their
    records were missing and that ACS borrowers', their records
    reflected servicing errors.
        And as a result, some ACS borrowers, they lost credit for
    qualifying for the Public Service Loan Forgiveness Program.
    They lost actual paperwork and documents with respect to their
    payments, and such losses will unfairly delay their ability to
    obtain forgiveness and increases the cost of their loans. And
    there is a risk that similar programs could arise from PHEAA's
    transfer of loans to other servicers.
        And it is important to note that not only PHEAA has--is
    considering--is transferring their loans, but there is other
    servicers that are considering servicing their loans to other
    services as we review--as the Federal Government reviews
    contracts. And to ensure that such problems do not happen in
    this upcoming--in the upcoming transfer, the Department of
    Education, together with State and Federal partners and my
    colleagues all across this Nation, State attorney generals, we
    must ensure that PHEAA and other servicers, that they provide
    all the necessary and accurate and up-to-date records relating
    to the loans, that they ensure that new servicers audit and
    actively monitor accounts for any errors that might occur
    during or prior to transfer, that they have adequate staff to
    meet the demands of all borrowers, and that they ensure
    borrowers are not penalized for prior service errors or errors
    arising from the transfer, and last, but not least, that the
    burden is not put on borrowers but that the burden is placed on
    servicers.
        The Department should apply a rebuttable presumption that
    payments made during the period of missing records or
    qualifying for the Public Service Loan Forgiveness Program.
    That is so absolutely, critically important.
        You know, as was mentioned before, Senator, Senator Warren,
    Chair Warren, in the previous hearing, indicated how the
    student loan program and the amount of debt really just
    exasperates the racial wealth gap in our Nation. And it is
    important that individuals understand that this wealth gap,
    unfortunately, is having a disproportionate impact on borrowers
    of color and low-income borrowers all across this Nation. It is
    a system that has already been indicated by the Chair and
    others a system that is broken and needs to be fixed as soon as
    possible.
        Senator Menendez. Well, thank you. That was a very full
    answer, took most of my time. Do you have a--may I have another
    minute or two?
        Chair Warren. Of course.
        Senator Menendez. Oh, OK.
        Chair Warren. Take as long as you need here.
        Senator Menendez. That spoke to many of the questions I
    had, so you gave me a very comprehensive answer, Madam Attorney
    General.
        So basically, ACS not only managed millions of borrowers'
    Federal loans, but they executed the transfer poorly, and those
    transferred loans were riddled with missing or inaccurate
    information. And is it true that you found that ACS deceived
    borrowers concerning the availability of their PSLF
    opportunities?
        Ms. James. Yeah. We are again in the practice of looking at
    all of these loans, and our allegations include, but are not
    limited, to the fact that they engaged in deceptive business
    practices, Senator.
        Senator Menendez. Mm-hmm. And is it true that that
    mismanagement that you uncovered from ACS blocked consumers
    from obtaining the forgiveness that they qualified for under
    the PSLF program?
        Ms. James. Not only blocked them but delayed their payments
    and delayed their ability to pay off these loans and to not
    only pay off the loans but also to get a loan forgiveness under
    the PSLF program.
        Senator Menendez. So I would like to ask both you and Ms.
    Yu, so if that is the experience that we have here, do we not
    agree that there needs to be extensive supervision, both by the
    Department of Education and the CFPB, to ensure there is not a
    repeat of the errors that hurt student borrowers?
        Ms. Yu. Absolutely.
        Ms. James. I would agree, along with attorney generals all
    across this Nation. There needs to be a collaboration with all
    of the various agencies as well as the attorney generals.
        Senator Menendez. Now finally, today, 3.3 million private
    student loan borrowers owe an estimated $80 billion in loans
    that reference LIBOR. As the lenders transition away from
    LIBOR, I am concerned about the lack of protections for
    borrowers in private student loan contracts. Ms. Yu, as lenders
    transition away from LIBOR, can private lenders choose a
    replacement reference rate that is higher, thereby potentially
    increasing the borrowers' interest rate?
        Ms. Yu. Yes, they can.
        Senator Menendez. And how can Congress and regulators
    ensure that lenders choose a replacement reference rate that is
    fairest to the borrowers? For example, should the CFPB release
    guidance to private lenders as they transition away from LIBOR
    to ensure that borrowers are not stuck permanently paying
    higher interest rates?
        Ms. Yu. Yes. The CFPB must quickly complete its rulemaking
    related to LIBOR and encourage companies to adopt the SOFR,
    which is the recommended rate by the Alternative Reference
    Rates Committee.
        Senator Menendez. Yes. You know, Madam Chair, this is an
    area where you could have a dramatic increase in debt as a
    result of the transfer away from LIBOR.
        And I have a real concern with the fact that--and this is
    the very last point I will make--Ms. Yu, your research found
    that millions of borrowers who have been in income-driven
    repayment programs for more than 20 years, of that, only 32
    borrowers have had their loans canceled through income-driven
    repayment. Is that right?
        Ms. Yu. That is absolutely right.
        Senator Menendez. And according to the CFPB, more than 90
    percent of African Americans and 72 percent of Latino students
    take out loans to attend college in comparison to 66 percent of
    White students. Additionally, minority borrowers are defaulting
    on their loans at disproportionately high rates. What is the
    impact of IDR problems on borrowers of color, who
    disproportionately rely on student loans?
        Ms. Yu. Absolutely. The impact is that borrowers of color
    are paying more on their loans for longer, and this is robbing
    families and their communities of the wealth that they need to
    rebuild--to, frankly, you know, bridge the racial wealth gap.
        Senator Menendez. Well, ``more for longer'' is not a phrase
    I like, Madam Chair. And, you know, ``less for less time''
    would be a lot better. So thank you to all of our witnesses for
    your insights.
        Chair Warren. And thank you, Senator Menendez. Appreciate
    your partnership in this. We will keep working on it. So,
    appreciate it.
        Let us see if we can wrap up where we are on the Public
    Service Loan Forgiveness Program. So the Public Service Loan
    Forgiveness Program was set up with a simple promise: Work in
    public service for 10 years, make payments toward your loans,
    and after a decade, your remaining balance will be canceled.
    But the Federal Government, with PHEAA's help, has failed to
    keep our end of the bargain.
        President Weingarten, let us go over some of the numbers
    here. You represent more than 1.7 million school teachers,
    nurses, early childhood educators, exactly the kinds of public
    servants who should benefit from this program. So I want to run
    through these numbers. How many people have applied for relief
    through the Public Service Loan Forgiveness?
        Ms. Weingarten. So, Madam Chair, according to the Education
    Department's most recent data, about 322,000 borrowers have
    applied for relief.
        Chair Warren. OK. And how many of those have successfully
    had their loans forgiven?
        Ms. Weingarten. 3,458.
        Chair Warren. And since you are a former school teacher,
    you can do the math on that?
        Ms. Weingarten. You know, I was a social studies teacher.
        Chair Warren. That is no excuse.
        Ms. Weingarten. But that is very few, about 2 percent.
        Chair Warren. About 2 percent. And here is the part that
    you can bring to Congress, to talk about it just one more time.
    You talk with your members. Why are they having trouble
    qualifying for loan forgiveness?
        Ms. Weingarten. So this is--I am really glad you asked that
    question, Madam Chair, because it was hard to--at least for me,
    it was hard to understand how teachers who very much follow the
    rules, that this was--as Senator Ossoff said earlier, it is a
    pretty simple promise that for 10 years, in exchange for you
    paying your debt each month for 10 years, you would get the
    rest of it forgiven.
        So they would be, you know, paying their debt. They would
    be sending in a coupon or doing a Venmo or doing whatever
    millennials do now to pay debt, and it would get credited, and
    they would keep the forms. But then what would happen is that
    they would hear ``Well, it is the wrong loan type'' or ``You
    are in the wrong repayment plan,'' or Servicer A said this, and
    then after 10 years Servicer A would say, ``Well, you have to
    go to the Department of Education to find out. You cannot talk
    to us about it.''
        And you would see these kinds of two different islands of
    misinformation because a person would go to the Department of
    Education and they would be told one piece of information and
    then they would go back to the servicer and say, ``The
    Department of Education said A'' and the servicer said, ``No,
    that is not true.''
        So it was a--it is a labyrinth where you could be wrong by
    a cent on 1 payment in 10 years and that could put you back to
    the beginning again.
        Chair Warren. Wow.
        Ms. Weingarten. It is--I have never seen such a mess from a
    program that is supposed to be pretty clear and the promise
    pretty direct.
        Chair Warren. Yes. Now there are a lot of reasons for this
    98 percent denial rate, this astronomical denial rate,
    including the complicated rules that Congress wrote. But a big
    part of the problem is that the Federal Government turned over
    the management of the program to a private company that could
    not do even the most basic part of the job. This company
    cheated public servants out of relief and, until recently,
    faced no meaningful consequences for its failures.
        Attorney General James, in your investigation, what role
    did you find that PHEAA played in denying forgiveness to public
    servants?
        Ms. James. My office alleges in our lawsuit that PHEAA's
    failure to accurately count the Public Student Loan Forgiveness
    qualifying payments contributed to, as you described, the
    shockingly high rate of denials, 98 percent, when borrowers
    apply for forgiveness.
        Again, the borrowers run the gamut. They are teachers. They
    are nurses. They are firefighters. They are police. They are
    librarians. They are even Government workers. And when we filed
    our lawsuit, again, more than 98 percent of those applications
    were rejected. And these are individuals, again, who have made
    payments and unfortunately were turned down, and they made
    these payments based on the promise that was made.
        And so going forward, we look forward to working with the
    Department of Education, and we look forward to working with
    our other--with other Federal and State partners to increase
    oversight over these servicers. In addition, it is important
    that, again, we extend the pause, that we offer $50,000 in debt
    relief to student borrowers, that we reverse the previous
    Administration's rule with respect to States being preempted by
    certain rules, and last but least, that the Federal agencies
    share information with State attorney generals so that we could
    collaborate and be partners together, to protect student
    borrowers all across this Nation.
        Chair Warren. Well, that is very powerful, Attorney General
    James, and I appreciate it.
        President Weingarten, I want to also give you a shot at
    that same question. What do you think the Department of
    Education should do to make this right?
        Ms. Weingarten. So first, the Department of Education has
    one of two choices. It could attempt to deal with 150,000
    claims that are backlogged, to try to untangle every single one
    of these in every single place. Or, it could actually have a
    presumption that says, if you have been a school teacher for 10
    years and you have some evidence that you have paid your loans,
    all the rest of the loans have been forgiven.
        And during this period of time, there could be a
    presumption that said that up to $50,000 of loans could be
    forgiven, which would be the preferable way because then you
    could start from scratch and fix these programs and hold these
    servicers accountable, and do the work that we need to do in
    the future to recruit and retain people in public service, and
    say, a promise made is a promise kept.
        But right now, it is such a tangled web. I do not know how
    any Department of Education is going to untangle the mess that
    Betsy DeVos left. So it would be the right thing to do to deal
    with the wealth gap, to deal with what has just happened in
    terms of the pandemic, to actually say, let us cancel $50,000
    of student debt and let us fix PSLF in the future.
        Chair Warren. Thank you. President Biden has the authority
    to fix this problem today. I know the Department of Education
    has put out a call for borrowers' feedback, and I encourage
    anyone who is watching this to submit their stories to the
    Secretary of Education, Secretary Cardona.
        I hope that once the Education Department hears from
    borrowers they will follow Congress's intent and simplify the
    rules of the program so that future public servants do not get
    lost in this maze. But let us be clear. We need wholesale
    forgiveness, and we need it now. People have been cheated. They
    have been given the runaround. People have been harmed over and
    over and over again. The President has the capacity to make
    this right, and it is time to do that.
        I would like to do one more issue before we leave today. So
    I am going to reset my clock here for another 5 minutes and ask
    a final round of questions. Just weeks after the Coronavirus
    pandemic started in March 2020, the Department of Education
    suspended student loan payments and collections and canceled
    student loan interest for every single student loan borrower. A
    Republican administration took this unprecedented step because
    borrowers needed help during a crisis.
        When he took office in January, President Biden extended
    this policy because millions of borrowers are still struggling
    to get back on their feet, but this payment pause is scheduled
    to end in just 2 months, on September 30th. This is a disaster
    in the making. This student loan time bomb could drag down our
    entire economic recovery when it explodes.
        Ms. Weingarten, tell me how important this student loan
    pause has been. How has the pause on student loan payments,
    interest, and collections affected the borrowers that you
    represent?
        Ms. Weingarten. So, sorry, Chair Warren, that I keep on
    telling stories of my members.
        Chair Warren. I want you to.
        Ms. Weingarten. But this is--this is--you know, it makes
    your heart break when you hear these stories and when you try
    to actually deal with this. So let me tell you about the story
    of Elise [phonetic], who is a clinical lab tech at SUNY Upstate
    Medical University in Syracuse. She went to college, she
    pursued her career, and then she had lots and lots of student
    loans. This is her quote to me: ``My husband and I drive a 10-
    year-old car. I cannot buy work shoes even though the ones I
    wear are contaminated with body fluids. I have to work overtime
    just to make ends meet. I am doing work that I love and that
    people depend on, but my debt is a prison sentence that will
    haunt me and my family for life.''
        What happened with the pause? It gave her the money so that
    her husband could stay home to care for her child because child
    care had closed while she was working. It gave them some
    breathing room so that they could buy a new car. It gave them
    the breathing room so that they did not have to worry every
    single month whether she was going to buy work shoes or whether
    she was going to pay her student debt.
        I hear these stories all the time, the kind of breathing
    room that it gave people so that they could navigate during
    this period of time, and even with that you see the stress that
    my members are under. That is why we are so concerned that in a
    month or two, as schools are trying to reopen, as our job is to
    create a welcoming and safe environment, people are going to
    start stressing about what they are going to do again when they
    start having payments of 200 to 400 to 600 to 1,000 dollars a
    month.
        And if we do not have a solution long-term for the debt, if
    we do not cancel that debt long-term, if they cannot figure
    that out, then they are going to have on top of that this PHEAA
    transition and these other transitions, which will be also
    equally stressful because the paperwork is so bad already.
        Chair Warren. The pause has been good for Elise, good for
    Elise's family, and good for our economy.
        Now some people are saying the economy is improving and as
    more people get vaccinated we are getting COVID under control.
    That is true, and that is obviously good news. So they are
    wondering, why do we still need a pause in student loan
    payments?
        You have talked about this some, President Weingarten. But,
    Ms. Yu, I want--your organization also works with student loan
    borrowers. So let us think together about how prepared student
    loan borrowers are. Have these borrowers been told what their
    monthly payments will be after the pause ends?
        Ms. Yu. They have not.
        Chair Warren. Have the servicers been proactively
    communicating with borrowers to help them get ready for a
    restart?
        Ms. Yu. No, they have not.
        Chair Warren. A lot of borrowers' financial situations have
    probably changed in the last year and a half. Has the
    Department of Education made it easier for people to enroll in
    income-driven repayment plans or to update their income
    information?
        Ms. Yu. No. In fact, the opposite, many people are
    struggling with that.
        Chair Warren. And some borrowers are facing other problems.
    If a borrower is facing eviction or foreclosure, do you think
    that paying their student loans is going to be at the top of
    their mind?
        Ms. Yu. Not at all.
        Chair Warren. You know, even before COVID, student loan
    debt disproportionately hurt people of color and exacerbated
    racial wealth gaps. These are the same communities that have
    been hardest by the pandemic. And as I said, the suspension is
    scheduled to end in just 2 months. So, Ms. Yu, what risks to
    consumers are you worried about if the repayments start on
    October 1st as scheduled?
        Ms. Yu. Thank you, Senator. So we know that the economic
    recovery has not been even and some of the most vulnerable
    borrowers are still struggling the most. We are very concerned
    about borrowers in default, who are going to have their Social
    Security benefits immediately seized when the payment
    suspension ends. I am very concerned about borrowers relying on
    their earned income tax credits and their child tax credits
    when next tax season comes. But we are also worried about the
    millions of borrowers who will not even know that payments have
    restarted because they have no contact with their servicers and
    will have trouble accessing income-driven repayment and then
    will fall into default as a result of communication failures
    and servicing errors.
        Chair Warren. You know, we talk about the borrowers are not
    ready; the system is chaotic. The student loan servicers are
    not ready either. When I ask them about their plans, one
    servicer described the complexity of the challenge as
    ``unprecedented,'' noting that ``The Federal Student Aid
    servicers have never attempted to move 43 million-plus accounts
    into a repayment status, all at once, all across the country.''
        Last month, I led 60 of my House and Senate colleagues in
    calling on President Biden to extend the payment pause at least
    until March 2022 to give borrowers, to give servicers, and to
    give the Department of Education more time to prepare. I am
    fighting to cancel $50,000 of student loan debt so that
    borrowers who are struggling can get permanent relief. In the
    meantime, borrowers are facing a financial disaster on October
    1st. President Biden should act immediately to make sure that
    all borrowers are protected.
        I want to thank our witnesses who have been here today. I
    want to thank you for your testimony. I also just want to thank
    you for your work, your hard work in the trenches on behalf of
    people who are struggling with student loan debt.
        For Senators who wish to submit questions for the record,
    those questions are due 1 week from today, Tuesday, August 3rd.
    For our witnesses, you will 45 days to respond to any
    questions. Thank you again for being here and sharing with us
    today.
        With that, this hearing is adjourned.
        [Whereupon, at 4:29 p.m., the hearing was adjourned.]
        [Prepared statements and additional material supplied for
    the record follow:]
                      PREPARED STATEMENT OF LETITIA JAMES
                   Attorney General for the State of New York
                                 July 27, 2021
        Good Afternoon Chair Warren, Ranking Member Kennedy, and Members of
    the Committee. My name is Letitia James and I am the Attorney General
    for the State of New York. Thank you for inviting me here today to
    discuss the challenges facing student loan borrowers and ways to
    protect them.
        My office has significant experience protecting student loan
    borrowers based on our enforcement of State and Federal consumer
    protection laws. Since 2019, we have undertaken major investigations
    and actions against for-profit colleges, student lenders, and student
    loan servicers. Our work resulted in a $9 million settlement with
    Federal student loan servicer Conduent, formerly known as ACS, that
    provided relief to more than 40,000 New York borrowers; $7.5 million in
    debt relief to more than 900 New York students at the now-defunct for-
    profit college ITT Tech; and a settlement with Transworld Systems, a
    student loan debt collector, which resulted in $600,000 in restitution
    and penalties.
        Our investigations have revealed that student loan borrowers are
    being harmed by the misconduct of student loan servicers. In October
    2019, my office filed a lawsuit against the Pennsylvania Higher
    Education Assistance Agency (PHEAA), one of the Nation's largest
    student loan servicers, for its mismanagement of the Public Service
    Loan Forgiveness (PSLF) program. This program allows people who work in
    public service, like teachers, nurses, and members of the armed forces,
    to have their loans forgiven after making qualifying payments for 10
    years. Our lawsuit alleges that PHEAA, operating under the name FedLoan
    Servicing, failed these hardworking people by not accurately counting
    PSLF-qualifying payments, failing to provide explanations of their
    determinations, and failing to inform borrowers of their options to
    challenge FedLoan's mistakes. As set out in our lawsuit, FedLoan's
    inability to properly administer the PSLF program contributed to the
    shockingly high rate of rejection of PSLF forgiveness applications.
    When we filed our lawsuit, more than 98 percent of applications were
    rejected as ineligible for forgiveness.
        PHEAA recently announced that it will not be renewing its contract
    with the Department of Education. However, State and Federal
    investigations have revealed that servicer misconduct extends beyond a
    single servicer. The widespread misconduct stems, in part, from the
    absence of comprehensive Federal servicing standards. To prevent
    misconduct from continuing, the Department should implement such
    standards, including:

        requiring servicers to provide accurate and timely
            information about income-driven repayment plans and PSLF
            eligibility;

        requiring servicers to act in the best interests of
            borrowers;

        imposing robust quality assurance measures;

        implementing mechanisms for borrowers to appeal servicer
            actions;

        requiring timely processing of borrower submissions; and

        penalizing servicers who violate State and Federal consumer
            protection laws, including by reallocating the Federal student
            loan portfolio to other servicers.

        In addition, the Department should provide relief to borrowers who
    have been harmed by servicer misconduct, including by retroactively
    crediting PSLF borrowers with qualifying payments. The Department
    should also ensure that the onus is on the servicer, not the borrower,
    to identify and correct servicer errors. In addition, where State and
    Federal investigations reveal systemic errors, the Department should
    provide broad, across-the-board relief to harmed borrowers.
        The Department should also continue its work to reverse former
    Secretary DeVos's actions to shield Federal servicers from State
    oversight. We applaud the Department for taking steps to restore
    information-sharing with State attorneys general offices. The
    Department should also retract Secretary DeVos's March 2018 notice that
    espoused the position that State consumer protection laws are preempted
    by Federal law with respect to Federal loan servicers. Retracting this
    ill-conceived notice will ensure that States can continue their
    important work to protect borrowers in our States.
        In addition, Congress should expand access to PSLF loan forgiveness
    to all Federal loan borrowers who devote 10 years to public service,
    regardless of the type of Federal loan or loan repayment plan.
    Expanding PSLF eligibility to encompass all such borrowers will provide
    relief to many who were victims of servicer error and will result in a
    fairer, more consistent, and more equitable PSLF program.
        Finally, the Federal Government should take action to cancel a
    substantial amount of Federal student debt. I co-led a multistate
    coalition of 17 attorneys general urging the adoption of House and
    Senate resolutions that call for the cancellation of up to $50,000 in
    Federal student debt for all Federal student loan borrowers. Canceling
    this debt will help free borrowers burdened by loan payments and allow
    them to move forward with their lives, as well as help to close the
    racial and gender wealth gap.
        The student debt crisis has been exacerbated by misconduct by
    student loan servicers. It is imperative that we create safeguards that
    protect students from servicer misconduct, especially students whose
    work and commitment to the public good benefit all of us. My office is
    committed to protecting students and student borrowers in New York
    State and across the country. Thank you for allowing me the opportunity
    to testify today.
                                     ______

                     PREPARED STATEMENT OF RANDI WEINGARTEN
                   President, American Federation of Teachers
                                 July 27, 2021
        Good afternoon, I'm Randi Weingarten, President of the American
    Federation of Teachers.
        Our union represents 1.7 million teachers and paraprofessionals,
    nurses, higher education faculty and staff, and public employees. In
    other words, AFT members work in professions that make a difference in
    the lives of others--professions that require college degrees, which
    means our members have been increasingly burdened by unsustainable
    college debt.
        Over the last year-and-a-half, members of these very professions
    have done heroic work, keeping our communities up and running, caring
    for patients in COVID-19 wards, and educating our children during a
    school year like no other. Our teachers and school staff from pre-K
    through college are planning a full return to in-person learning, and
    they know they will need to make their students feel safe and welcome
    amid the myriad crises facing our Nation. A survey we did with the Rand
    Corp. showed 78 percent of teachers reported experiencing frequent job-
    related stress--almost twice as many as most other working adults
    during the pandemic. And now, for many, the looming restart of student
    loan payments in the fall is deeply concerning and potentially ruinous
    financially.
        I am here on behalf them to raise concerns, especially in light of
    the news that the Pennsylvania Higher Education Assistance Agency
    (PHEAA) will no longer service student loans.
        Most AFT members are eligible for Public Service Loan Forgiveness,
    but after 3\1/2\ years, the Education Department is still rejecting 98
    percent of applications and has nearly 150,000 PSLF applications in
    backlog.
        The Biden administration inherited a broken system and wisely
    extended the moratorium on student debt that the Trump administration
    enacted. Combined, the two have effectively canceled over $90 billion
    in student loan interest.
        The Biden administration and the Education Department can restore
    the promise of PSLF now--before student loan payments resume this
    September--and immediately discharge debts for all borrowers who have
    completed at least a decade of public service while paying their
    Federal student loans.
        Borrowers need real relief, not a mirage. They need help from a
    Government that promised to forgive the remainder of any debt still
    unpaid after 10 years of payments if they went into public service. And
    they need a reason to tell the next generation of borrowers that public
    service work is meaningful and valuable, not a clear path to a lifetime
    of debt that will force them to make terrible decisions about whether
    to pay their loans, buy a home, or put food on the table.
        Take, for example, Christine Conlon, a school-based occupational
    therapist in Staten Island, N.Y. For years, Christine has kept detailed
    notes about her student loan payments, but she can't get PHEAA to
    reconcile its records with the evidence she is repeatedly providing to
    them. Christine should be just a few years away from PSLF if not for
    the problem of PHEAA failing to properly record her payments, and that
    has meant she has put off major life choices like buying a home.
        Every day, horror stories like Christine's arise detailing
    borrowers who learn years into repayment that a technicality made them
    ineligible for PSLF, that their servicer lied, and that they will have
    to restart the 10-year clock toward PSLF--if they're still even able to
    do that. As countless lawsuits by State attorneys general have made
    clear, student loan servicing companies, like PHEAA--working on behalf
    of the department--have failed to provide borrowers with sufficient and
    correct information regarding PSLF eligibility.
        The AFT has made extraordinary efforts to make PSLF work, but we've
    also had to deliver financially devastating news to our teachers,
    corrections officers, and nurses, information their servicers and the
    Education Department should have given them years before. We have even
    had to go to court to seek the justice our members were not getting on
    their own.
        And while servicer errors have plagued the PSLF program for years,
    this reality became blindingly apparent during the last Administration.
    Now that the Biden-Harris administration seems primed to hold servicers
    accountable, those servicers, like PHEAA, are canceling their contracts
    instead of being subject to meaningful oversight. This is evidence of a
    system run catastrophically amok.
        If the Administration does not cancel student debt for public
    service workers before the fall, millions of them will be forced to
    transfer the loans currently serviced by PHEAA to new servicers that
    will inherit loans with paper trails that can never be untangled.
        The problem is clear, and the solution is too: The Administration
    should cancel debt for all public service workers who have made
    payments on their Federal loans for a decade AND should cancel up to
    $50,000 of debt per borrower.
        These actions will make a big difference for communities of color:
    93 percent of the lowest-income Black households with student debt
    would experience total student debt relief with $50,000 in
    cancellation. And debt cancellation would be an immediate and long-
    lasting stimulus to our economy--increasing average yearly pay by
    $3,000 and increasing the gross domestic product by $1 trillion.
        The promise of Public Service Loan Forgiveness remains broken, and
    while the Education Department recently took a positive step by
    soliciting feedback on these failures, public service workers can't
    wait for a fix or new rule years into the future. On behalf of millions
    of borrowers, I call on the Administration to cancel student debt now.
                                     ______

                        PREPARED STATEMENT OF PERSIS YU
     Director, Student Loan Borrower Assistance Project, National Consumer
                                   Law Center
                                 July 27, 2021
    Introduction
        Chairwoman Warren, Ranking Member Kennedy, and Members of the
    Committee, thank you for inviting me to testify today regarding how to
    protect student borrowers in the upcoming transitions in the student
    loan system. I offer my testimony here on behalf of the low-income
    clients of the National Consumer Law Center (NCLC). \1\
    ---------------------------------------------------------------------------
         \1\ The National Consumer Law Center (NCLC) is a nonprofit
    organization specializing in consumer issues on behalf of low-income
    people. Since 1969, we have worked with thousands of legal services,
    Government, and private attorneys and their clients, as well as
    community groups and organizations that represent low-income and older
    individuals on consumer issues. NCLC's Student Loan Borrower Assistance
    Project provides information about student rights and responsibilities
    for borrowers and advocates, and provides direct legal representation
    to student loan borrowers. We work with other advocates across the
    country representing low-income clients. We also seek to increase
    public understanding of student lending issues and to identify policy
    solutions to promote access to education, lessen student debt burdens,
    and make loan repayment more manageable. See the Project's website at
    www.studentloanborrowerassistance.org.
    ---------------------------------------------------------------------------
        As the director of NCLC's Student Loan Borrower Assistance Project
    at NCLC, I lead NCLC's policy and advocacy efforts to make the student
    loan system work for the students it is intended to help. Our efforts
    are grounded in our direct legal assistance work with low-income
    clients in Massachusetts who are struggling with student loan debt. In
    addition to our work in Massachusetts, we consult with advocates across
    the country representing borrowers, many with complaints against
    student loan servicers.
        Our clients, and millions of others like them, take out student
    loans believing they are the key to a better future. But for many, that
    dream will never come to fruition because the student loan system is
    broken and has been broken for a very long time. Currently in the
    United States, nearly 45 million people owe more than $1.7 trillion on
    their student loans. Prior to the pandemic, roughly a quarter of
    Federal borrowers were delinquent or in default on their loans. \2\ As
    I and my colleagues witness every day from low-income borrowers here in
    Massachusetts, borrowers often default because they do not understand
    how to navigate the Federal student loan system and their loan
    servicers fail to provide them with accurate information.
    ---------------------------------------------------------------------------
         \2\ See U.S. Dep't of Educ., Federal Student Aid, Data Center,
    Federal Student Loan Portfolio; see also, Student Loan Servicing:
    Analysis of Public Input and Recommendations for Reform, Consumer Fin.
    Prot. Bureau (Sept. 2015).
    ---------------------------------------------------------------------------
        Defaulting carries severe consequences for borrowers and their
    families. The Federal Government has collection powers against
    defaulted student loans that far exceed the collection powers of most
    unsecured creditors. Wielding these coercive collection tools, the
    Government often siphons thousands of dollars from borrowers already
    experiencing financial distress. The Government can garnish a
    borrower's wages without a judgment, seize tax refunds (including the
    Earned Income Tax Credit (EITC) and Child Tax Credit (CTC)), and seize
    portions of Federal benefits such as Social Security. The amount the
    Government seizes using these tools often is far greater than the
    amounts borrowers would have been required to pay under an income-
    driven repayment (IDR) plan. These punitive collection activities can
    push low income households to or over the financial brink. Facing
    involuntary collections often means that our clients cannot afford
    their rent, pay for medication, cover transportation to and from work,
    or even buy food. Simply put, the student debt crisis was already
    hampering both families' and the Nation's economic stability even
    before the current pandemic.
        Racial disparities in the student loan portfolio and with default
    rates in particular disproportionately expose borrowers of color to
    these Government offsets and other damaging debt collection practices.
    \3\ At every income level, Black households are more likely to hold
    student debt than their White counterparts. \4\ Moreover, as the
    Education Trust's research shows, at every income level, Black
    borrowers are more likely to default than White borrowers. \5\ In fact,
    Black borrowers at the highest income levels are twice as likely to
    default than the lowest earning White borrowers. Thus, the Government's
    collection practices have the disastrous effect of systematically
    removing wealth from communities of color through seizures of wages,
    tax refunds, and benefits to service student debts and huge collection
    fees. In effect, such practices systematically strip wealth from
    families and communities which are already economically disadvantaged
    and disproportionately of color. Cruelly, the communities hit hardest
    by student loan crisis are also the same communities hit the hardest by
    the COVID-19 global health crisis.
    ---------------------------------------------------------------------------
         \3\ Judith Scott-Clayton, ``The Looming Student Loan Default
    Crisis Is Worse Than We Thought'', Economic Studies at Brookings (Jan.
    2018), available at https://www.brookings.edu/research/the-looming-
    student-loan-default-crisis-isworse-than-we-thought/; Ben Miller, ``The
    Continued Student Loan Crisis for Black Borrowers'', Center for
    American Progress (Dec. 2, 2019), available at https://
    www.americanprogress.org/issues/educationpostsecondary/reports/2019/12/
    02/477929/continued-student-loan-crisis-black-borrowers.
         \4\ Raphael Charron-Chenier and Louise Seamster, ``Some Notes on
    the Impact of Student Debt Forgiveness Across Income Groups'',
    Scatterplot (Dec. 17, 2020) available at https://scatter.wordpress.com/
    2020/12/17/some-notes-onthe-impact-of-student-debt-forgiveness-across-
    income-groups/.
         \5\ Victoria Jackson and Tiffany Jones, ``The `Black Tax' Is Key
    to Understanding and Solving the Black Student Debt Crisis in the Time
    of COVID-19 and Beyond'', The Education Trust, (Apr. 16, 2020)
    available at https://edtrust.org/resource/the-black-tax-is-key-to-
    understanding-and-solving-the-black-student-debt-crisis-in-thetime-of-
    covid-19-and-beyond/.
    ---------------------------------------------------------------------------
    Protecting Low-Income Borrowers During Loan Transfers and Restarting
            Repayment
        As the U.S. Department of Education restarts Federal student loan
    repayment for over 30 million student loan borrowers, high quality
    servicing is going to be paramount. Despite the critical nature of
    servicing at this time, both the Pennsylvania Higher Education
    Assistance Agency \6\ (AKA ``FedLoan Servicing'') and the New Hampshire
    Higher Education Loan Corporation \7\ (AKA ``Granite State Management &
    Resources'') announced that they will not be extending their Federal
    contracts this December. This has potentially devastating consequences
    for, not just for the roughly 10 million borrowers whose loans will
    need to be transferred, but for all borrowers in the Federal student
    loan portfolio. The remaining servicers will need to rapidly increase
    staffing and train a whole cadre of customer service representatives in
    a very short amount of time in order to absorb the accounts of nearly a
    third of all Direct loan borrowers.
    ---------------------------------------------------------------------------
         \6\ Pennsylvania Higher Education Assistance Agency, ``News
    Advisory: PHEAA Federal Student Loan Contract Statement'' (July 8,
    2021) https://www.pheaa.org/documents/press-releases/ph/070721.pdf.
         \7\ New Hampshire Higher Education Association Foundation, Press
    Release: ``NHHEAF Network Will Not Seek Renewal of Federal Student Loan
    Servicing Contract'' (July 19, 2021) https://www.nhheaf.org/pdfs/
    investor/NHHEAF-Network-IR-Announcement-07-19-21.pdf.
    ---------------------------------------------------------------------------
        Even prior to the two servicers' announcements that they were not
    renewing their contracts, research by The Pew Charitable Trusts
    concluded that ``simultaneously navigating uncertainty, financial
    challenges, and a confusing repayment system could lead borrowers to
    reach out to loan servicers in unprecedented numbers when payments
    resume, overwhelming the system.'' \8\ At a time when two major changes
    are occurring for student loan borrowers, borrowers need the best
    servicing possible. Instead, they will likely encounter inexperienced
    customer service representatives and servicers who are stretched too
    thin.
    ---------------------------------------------------------------------------
         \8\ Sarah Sattelmeyer and Lexi West, ``Outreach From Borrowers
    Could Overwhelm Student Loan System When Pandemic Pauses End'', Pew
    Charitable Trusts (Nov. 3, 2020) available at https://
    www.pewtrusts.org/en/researchand-analysis/articles/2020/11/03/outreach-
    from-borrowers-could-overwhelm-student-loan-system-when-pandemicpauses-
    end.
    ---------------------------------------------------------------------------
        It is imperative that the Department of Education protect the
    interests of the most vulnerable student loan borrowers as it decides
    how and when to restart repayment while also transferring roughly 10
    million borrowers' loans. \9\ Borrowers--low-income and otherwise
    vulnerable student loan borrowers in particular--are at significant
    risk during the upcoming transitions. As will be described in greater
    detail, the combination of restarting repayment, along with the risks
    associated with large scale loan transfers by servicers with a long
    history of failing to adequately serve Federal student loan borrowers,
    will have cataclysmic consequences unless meaningful consumer
    protections are put in place.
    ---------------------------------------------------------------------------
         \9\ Michael Stratford, ``Another Federal Student Loan Servicer To
    Call It Quits'', Politico (July 20, 2021), https://
    subscriber.politicopro.com/article/2021/07/another-federal-student-
    loan-servicer-calls-it-quits-2070755.
    ---------------------------------------------------------------------------
    1. Risk of Restarting Repayment for Borrowers
        Since the passage of the CARES Act in March 2020, Congress put
    critical protections in place to help Federal student loan borrowers
    weather the COVID-19 pandemic. Among other protections, the CARES Act
    suspended payments and interest accrual and ceased collection on all
    Department-held Federal student loans. That payment suspension is
    currently set to expire on September 30. The end of the COVID-19
    payment suspension is fraught with risk as the Department of Education
    attempts the unprecedented task of bringing tens of millions of student
    loan accounts into repayment after over a-year-and-half of being
    suspended. Historical data from the Department demonstrates that
    default rates typically spike following disaster-related forbearances.
    \10\ Specifically, following Hurricanes Harvey, Irma, and Maria and the
    California wildfires, the loans of borrowers living in those impacted
    areas were placed in mandatory administrative forbearance. \11\ This
    means that borrowers' loans were counted as being current without the
    borrower having to make any payments, something intended to help people
    deal with the fallout of a natural disaster. Unfortunately, after these
    disaster forbearances ended, many borrowers never reentered repayment
    which resulted in their loans defaulting. The resumption of payments
    following the COVID-19 payment suspension has the potential to be much
    worse than what we saw following these previous disasters because those
    were much shorter in duration and impacted a significantly smaller
    number of borrowers. Allowing borrowers to fall into default following
    the end of the payment suspension, which would make them vulnerable to
    loss of wages, social security benefits, and the critical family
    supports such as the EITC and CTC, will have devastating consequences
    for these borrowers and will eviscerate any economic recovery following
    the pandemic.
    ---------------------------------------------------------------------------
         \10\ Ben Kaufman, ``New Data Show Student Loan Defaults Spiked in
    2019--A Warning to Industry and DeVos Amid Economic Fallout'', Student
    Borrower Protection Center (Mar. 13, 2020), available at https://
    protectborrowers.org/every-26-seconds/ (citing Fed. Student Aid,
    Federal Student Aid Posts New Reports to FSA Data Center (Aug. 07,
    2019)).
         \11\ Id.
    ---------------------------------------------------------------------------
        The risks created by the transition to repayment are not limited to
    eventual student loan default, which only occurs 270 days after missing
    a payment. Even before a payment is missed, borrowers can suffer dire
    consequences such as overdrawn bank accounts if auto-debits resume
    without borrowers having sufficient funds in their bank accounts. If
    payments are unaffordable, borrowers may be forced to either forgo
    paying for basic necessities or miss their student loan payments and
    experience negative credit reporting which can hold them back for years
    to come.
        In addition, approximately 9 million student loan borrowers are
    currently in default. \12\ Unless the Department takes immediate action
    to remove these borrowers from default, they will be subject to the
    Government's draconian collection powers immediately upon the end of
    the payment suspension. \13\ Many of the borrowers in default are older
    Americans who will face seizure of a portion of their Social Security
    benefits for old student loans of their own or loans they took out for
    family members.
    ---------------------------------------------------------------------------
         \12\ U.S. Dep't of Educ., Federal Student Aid Default Management,
    Official Cohort Default Rates for Schools, https://www2.ed.gov/offices/
    OSFAP/defaultmanagement/cdr.html.
         \13\ Letter from Senator Elizabeth Warren, et al., to Secretary of
    Education Miguel Cardona dated April 19, 2021, available at https://
    www.warren.senate.gov/imo/media/doc/
    2021.04.19%20Letter%20to%20ED%20about%20Auto%20Rehab%20Student%20Loans.p
    df. See also Sarah Sattlemeyer, ``3 Ways Biden Can Help Families and
    Student Loan Borrowers'', Brookings (April 22, 2021) available at
    https://www.brookings.edu/research/three-ways-the-biden-administration-
    can-help-families-and-student-loan-borrowers-affected-by-the-pandemic/.
    ---------------------------------------------------------------------------
    2. Risk of Transfer of Loan Servicing
        Prior large-scale transfers of Direct loans have resulted in
    serious long-term harm to vast numbers of Federal student loan
    borrowers and should serve as a warning for the upcoming loan
    transfers. From the beginning of the Government's Direct Loan Program
    in 1994 until 2008, the Department of Education contracted with a
    single Direct Loan servicer--ACS (Xerox). In 2009, as it was moving to
    a system under which nearly all student loans were originated directly
    by the Federal Government through the Direct Loan Program, the
    Department entered into new servicing contracts with four companies,
    Great Lakes Educational Loan Services, Nelnet, FedLoan Servicing
    (PHEAA), and Sallie Mae (now Navient). Loans were transferred from ACS
    to the new servicers between the years 2009 and 2013. \14\ The
    Department also contracts with a number of nonprofit student loan
    servicers, including Cornerstone, Granite State, HESC/EdFinancial,
    MOHELA, and OSLA. \15\
    ---------------------------------------------------------------------------
         \14\ National Consumer Law Center, Student Loan Law 5.2.1.1 (6th
    ed. 2019), updated at www.nclc.org/library.
         \15\ Id.
    ---------------------------------------------------------------------------
        As described by a report by the American Federation of Teachers and
    the Student Borrower Protection Center:

            Public reports contemporaneous to the transition indicate not
            only that ACS executed the handover process poorly, but the
            transferred loans were also plagued with missing or inaccurate
            information, among a host of other servicing errors. In 2012,
            one journalist described Direct Loan borrowers as `Dazed and
            Confused by [the] Servicer Shuffle,' while a large, unnamed
            student loan servicer reported to the CFPB that at least half a
            million transferred accounts had problems. \16\
    ---------------------------------------------------------------------------
         \16\ ``Broken Promises: The Untold Failures of ACS Servicing'',
    American Federation of Teachers and Student Borrower Protection Center
    (Oct. 2020) available at https://protectborrowers.org/wp-content/
    uploads/2020/12/Broken-Promises-ACS-12-9.pdf.

        Borrowers whose loans were transferred during this time complained
    that ``they were hit with higher payments and fees after their loan
    balances were transferred to another servicer . . . without warning.''
    \17\ Data shows that over a hundred thousand loans were transferred
    with ``incorrect information or with borrower information missing,
    including data related to past bankruptcy settlements.'' \18\
    ---------------------------------------------------------------------------
         \17\ Lisa Parker, ``Student Loan Borrowers Say They're Being
    Gouged'', NBC 5 Chi. (July 23, 2013) https://www.nbcchicago.com/news/
    local/target-5-student-loans-mohela/1955834/.
         \18\ ``Broken Promises'', supra n. 16.
    ---------------------------------------------------------------------------
        The impact of this incorrect information has had lingering effects
    on the Federal student loan portfolio today. Thousands of borrowers
    seeking to cancel their loans through the Public Service Loan
    Forgiveness (PSLF) program are struggling to demonstrate that they have
    made the required number of qualifying payments. These PSLF problems
    are a foreboding sign of what is to come. Many low-income borrowers
    will soon qualify for forgiveness of the remainder of their student
    loans because of having made 20 or 25 years worth of qualifying
    payments in IDR. If the transfer of servicing results in the same level
    of erroneous and lost payment records, we will see the same chaos but
    with our most vulnerable borrowers.
        Finally, loan transfers inevitably result in massive confusion for
    borrowers. As Will Shaffner, MOHELA's director of business development
    and Government relations said in 2012, ``Anytime you change a servicing
    relationship, it can cause concern.'' \19\ Additionally, the ability to
    contact borrowers will be hampered by the lack of good contact
    information on file for tens, if not hundreds of thousands of
    borrowers. \20\ Given that most borrowers have not had contact with
    their servicers since March 2020, the number of borrowers without
    accurate contact information has likely increased. This will
    disproportionately harm low-income borrowers who are more likely to
    have moved during the payment suspension.
    ---------------------------------------------------------------------------
         \19\ Marian Wang, ``Student Loan Borrowers Dazed and Confused by
    Servicer Shuffle'', ProPublica (Apr. 23, 2012) available at https://
    www.propublica.org/article/student-loan-borrowers-dazed-and-confused-
    by-servicer-shuffle.
         \20\ During the COVID-suspension, the Department of Education was
    unable to return illegally seized wages to over 20,000 borrowers due to
    not having current contact information for these borrowers. See Lawsuit
    Against DeVos Ends; Fight for Defrauded Borrowers Continues, Nat'l
    Consumer Law Center, (Mar. 22, 2021) available at https://
    www.studentloanborrowerassistance.org/lawsuit-against-devos-ends-fight-
    for-defaulted-borrowerscontinues/. Similarly, in attempting to
    notifying borrowers who were determined to qualify for a total and
    permanent disability discharge through a data match with the Social
    Security Administration, nearly 47,000 notices were returned for to
    sender. See Response to National Student Legal Defense Network request
    to U.S. Dep't of Education, 21-01335-F (May 24, 2021).
    ---------------------------------------------------------------------------
        The Department of Education must take steps to ameliorate the
    negative consequences of loan transfers and to make sure that repayment
    is not restarted until loans have been successfully transferred.
    3. The History of Servicing Abuses Preventing Borrowers From Accessing
            High Quality Servicing
        Servicers are often borrowers' first point of contact when
    attempting to resolve their student loans. With the assistance of a
    competent and efficient servicer, financially distressed borrowers may
    avoid default by accessing the flexible repayment plan, loan
    cancellation program, or deferment or forbearance option appropriate
    for their circumstances. Unfortunately, as has been extensively
    documented, the student loan servicing industry has long been rife with
    misconduct.
        The four largest Federal student loan servicers have a documented
    history of ``widespread servicing failures'' that ``create obstacles to
    repayment, raise costs, cause distress'' and ``driv[e] borrowers to
    default.'' \21\ According to an October 2017 report by the Consumer
    Financial Protection Bureau (CFPB), problems in the student loan
    servicing industry included a range of payment processing, billing,
    customer service, borrower communications, and income-driven repayment
    plan enrollment problems. \22\
    ---------------------------------------------------------------------------
         \21\ CFPB Concerned About Widespread Servicing Failures Reported
    by Student Loan Borrowers, Consumer Fin. Prot. Bureau (Sept. 29, 2015).
         \22\ Annual report of the CFPB Student Loan Ombudsman Strategies
    for Consumer-Driven Reform, Consumer Fin. Prot. Bureau (Oct. 2017).
    ---------------------------------------------------------------------------
        Income-driven repayment (IDR) is at the heart of affordable loan
    repayment options offered by the Higher Education Act (HEA), which
    governs the Federal student loan program. IDR plans require borrowers
    to pay only a set percentage of their income toward their student loan
    bills. Depending on the borrower's income, this can be a small or even
    zero monthly payment. \23\ An IDR plan gives the borrower a sustainable
    loan repayment amount and a path to forgiveness of any remaining
    balance after 20 or 25 years of IDR payments. \24\
    ---------------------------------------------------------------------------
         \23\ 20 U.S.C. 1087e(d)(1)(E) (applicable to Direct Loans),
    1098e (FFEL). See 34 CFR 682.215 (FFEL), 685.221 (Direct Loan).
         \24\ Id.
    ---------------------------------------------------------------------------
        More than 25 years have passed since the implementation of the
    first IDR plan, the Income-Contingent Repayment Plan (ICR). This means
    that student loan borrowers who entered ICR before 1996 should be
    receiving loan forgiveness for completing 25 years of qualifying
    payments. Because of changes in IDR repayment options, borrowers
    originally enrolled in ICR who have not yet completed 25 years of
    payments can achieve forgiveness sooner or immediately by switching to
    the Revised Pay As You Earn plan, which counts the prior payments and,
    for borrowers without graduate debt, has a shorter repayment period (20
    years). Yet, of the 4.4 million borrowers \25\ who have been in
    repayment on their Federal loan for more than 20 years, only 32
    borrowers have received cancellation under IDR. \26\
    ---------------------------------------------------------------------------
         \25\ Education Department Responses to Data Request by Senator
    Warren, (April 2, 2021) available at https://www.warren.senate.gov/imo/
    media/doc/Education%20Department%20Response
    %20to%20Sen%20Warren%20-%204-8-21.pdf.
         \26\ ``Education Department's Decades-Old Debt Trap: How the
    Mismanagement of Income-Driven Repayment Locked Millions in Debt'',
    Nat'l Consumer Law Center & Student Borrower Protection Center (March
    2021), available at https://www.nclc.org/images/pdf/student-loans/IB-
    IDR.pdf.
    ---------------------------------------------------------------------------
        Moreover, despite the abundant benefits of IDR plans to the
    financial health of borrowers and their families, the Department and
    its servicers have consistently failed to make these plans accessible
    for many borrowers, and the U.S. Government Accountability Office (GAO)
    has documented low levels of participation by eligible borrowers. \27\
    Problems with enrolling and renewing borrowers in IDR are prevalent.
    Entering a borrower into an IDR plan is time-intensive and expensive
    for servicers, so too often servicers fail to invest resources in
    ensuring that borrowers understand and successfully access the most
    affordable and sustainable repayment plan. Instead, servicers steer
    many borrowers into forbearances and deferments, which are profitable
    for the servicer but costly to the borrower, and in many cases,
    servicers have misrepresented that those borrowers have no other
    repayment options.
    ---------------------------------------------------------------------------
         \27\ U.S. Gov't Accountability Office, ``Federal Student Loans:
    Education Could Do More To Help Ensure Borrowers Are Aware of Repayment
    and Forgiveness Options'', Report No. GAO-15-66 (Aug. 2015).
    ---------------------------------------------------------------------------
        An NCLC client had this experience as she struggled to afford her
    student loan payments after completing a medical assistant program at a
    local for-profit school. Every year, she dutifully contacted her
    servicer and submitted documentation of her financial hardship.
    Nevertheless, despite clear eligibility for a zero-dollar payment, she
    had never been enrolled in an IDR plan. When this borrower came to
    NCLC, she had never even heard of IDR options. Instead, each year when
    she called her servicer to discuss her financial situation and options,
    she was directed into a number of forbearances. She had been out of
    school since for over 7 years before coming to our office and was still
    in good standing on her loan, due to her extreme diligence. However,
    the servicer's actions steering her towards forbearance have wasted
    years she could have spent in an affordable repayment plan, working
    toward the eventual resolution of her loan. This client's experience is
    far from unique, and private and State enforcement actions targeted at
    this type of misbehavior tell similar stories. \28\
    ---------------------------------------------------------------------------
         \28\ Consumer Financial Protection Bureau, Office for Older
    Americans & Office for Students and Young Consumers, Snapshot of Older
    Consumers and Student Loan Debt (Jan. 2017). See, e.g., Consumer Fin.
    Prot. Bureau v. Navient Corp., 2017 WL 3380530 (M.D. Pa. Aug. 4, 2017);
    Lawson-Ross v. Great Lakes Higher Education Corp., No. 18-14490 (11th
    Cir. 2020); Grewal v. Navient Corp., No. ESX-C-172-2020 (N.J. Super.
    Ct. Ch. Div. Oct. 20, 2020); People v. Pa. Higher Educ. Assistance
    Agency, No. 1:2019cv09155 (S.D.N.Y. Oct. 3, 2019); Vullo v. Conduent
    Educ. Services (Jan. 4, 2019) (consent order), available at
    www.dfs.ny.gov; Nelson v. Great Lakes Higher Education Corp., No. 18-
    1531 (7th Cir. 2019); People v. Navient Corp., No. CGC-18-567732 (Cal.
    Super. Ct. Nov. 1, 2018) (first amended complaint); Mississippi v.
    Navient Corp, No. 25CH1:18-CV-00982 (Miss. Ch. Ct. Hinds Cty. July 17,
    2018); Commonwealth v. Navient Corp., No. 19-2116 (M.D. Pa. Oct. 5,
    2017); Marek v. Navient Corp., 2017 WL 2881606 (N.D. Ohio July 6,
    2017); People v. Navient Corp., No. 17CH761 (Ill. Cir. Ct. Cook Cty.
    Jan. 18, 2017) (complaint).
    ---------------------------------------------------------------------------
        Failing to ensure that borrowers are able to access IDR has harmful
    and expensive consequences. In 2016, the GAO estimated that a borrower
    owing $30,000 in Federal loans who spent 3 years in a forbearance would
    pay $6,742 more than a borrower on a 10-year standard repayment plan
    who did not spend any time in forbearance. \29\ The GAO further stated
    that encouraging ``forbearance over other options that may be more
    beneficial, such as [IDR] plans,'' will continue to place some
    borrowers ``at risk of incurring additional costs without any longterm
    benefits.'' \30\
    ---------------------------------------------------------------------------
         \29\ U.S. Gov't Accountability Office, ``Federal Student Loans:
    Education Could Improve Direct Loan Program Customer Service and
    Oversight: Highlights'', Report No. GAO-16-523, 19 (May 16, 2016).
         \30\ Id. at 20.
    ---------------------------------------------------------------------------
        Getting borrowers into an affordable IDR plan will be particularly
    important for ensuring borrower success following the upcoming restart
    to repayment. Without improvements by servicers, borrowers will lose
    out on the many important benefits of IDR, such as making qualifying
    payments towards cancellation after 20 or 25 years, or 10 years for
    public service workers. In the worst case, borrowers will lose out on
    the opportunity to stay in good standing on their loans and may fall
    into default with its devastating consequences.
    4. The Need for Greater Servicer Accountability and Remedies for
            Borrowers
        Unlike the protections in other areas of consumer credit such as
    credit cards and mortgages, there are few laws specifically governing
    student loan servicer conduct for either Federal or private loans. In
    its October 2013 report, the CFPB pointed to protections in the Real
    Estate Settlement Procedures Act (RESPA) for mortgages and the Credit
    Card Accountability Responsibility and Disclosure (CARD) Act for credit
    cards and the need to examine whether these types of reforms could
    apply to the student loan servicing market. \31\
    ---------------------------------------------------------------------------
         \31\ Annual Report of the CFPB Student Loan Ombudsman, Consumer
    Fin. Prot. Bureau (October 16, 2013).
    ---------------------------------------------------------------------------
        The CFPB pointed out that some of the provisions in mortgage
    servicing rules that could apply to student loan servicers include
    notice of transfer of loan servicing, timely transfer of documents to
    new servicers, payoff statements, error resolution and dispute review
    procedures, continuity of contact, records retention, and early
    intervention for borrowers nearing default. \32\
    ---------------------------------------------------------------------------
         \32\ Id.
    ---------------------------------------------------------------------------
        In April 2019, the New York Times highlighted one of the problems
    keeping borrowers from accessing loan forgiveness: errors in the count
    of their qualifying payments. \33\ In order to verify the number of
    qualifying payments and to ensure that servicers are counting payments
    properly, borrowers need to have access to a full and complete payment
    history. Unfortunately, borrowers do not currently have easy access to
    this information, as servicers are often the only ones who have this
    data. Borrowers are able to get basic loan level information from the
    Federal Student Aid website, but it does not provide payment level
    data.
    ---------------------------------------------------------------------------
         \33\ Ron Lieber, ``Your Student Loan Servicer Will Call You Back
    in a Year. Sorry.'' N.Y. Times, April 12, 2019.
    ---------------------------------------------------------------------------
        The student loan servicer that is servicing a particular loan
    should have payment records, but the extent to which they make this
    information available varies by servicer. \34\ In contrast to
    mortgages, where servicers are required to provide the borrower with
    information within 30 days of a qualifying written request, there are
    no Federal standards requiring a student loan servicer to give the
    borrower a payment history.
    ---------------------------------------------------------------------------
         \34\ See Persis Yu, ``Student Loan Forgiveness Cannot Work Without
    a Right to a Payment History'' (May 22, 2019), available at https://
    protectborrowers.org/qualifying-payments/.
    ---------------------------------------------------------------------------
        According to the New York Times, some borrowers are told that it
    could take up to a year to get the information. \35\ It took over a
    year-and-a-half for one NCLC client to receive a complete payment
    history from FedLoan Servicing.
    ---------------------------------------------------------------------------
         \35\ Lieber, supra n. 33.
    ---------------------------------------------------------------------------
        There are some protections in the contracts that the Department
    signs with the servicers. However, borrowers rarely know about those
    rights. In general, the Department states in the contracts that it does
    not intend to provide additional service level requirements, but it
    does expect ``best of business practices'' to be deployed. Servicers
    are also required to meet ``all statutory and legislative
    requirements.'' The contractually provided incentives fail to set
    standard and transparent borrower protections and for too long, the
    Department has failed to adequately enforce these requirements.
    Further, the lack of Department enforcement combined with limited
    borrower rights to enforce protections means that servicers are largely
    unaccountable when they fail to provide quality service or violate
    applicable law.
        Even if the Department acted more aggressively to police the
    contractors through termination or sanctions, harmed borrowers would
    not be made whole. Often, the harm caused by servicer errors and abuses
    cannot be remedied by simply applying an administrative forbearance or
    returning the borrower's money. For example, when money is erroneously
    debited from a borrower's bank account, it can lead to overdraft fees
    and insufficient funds to cover basic necessities like groceries or
    rent. When servicer abuses prevent borrowers from accessing critical
    programs or missing out on qualifying payments for IDR and PSLF, it
    causes borrowers to pay for a longer time and to pay more over the life
    of the loan. Fairness and justice require that borrowers have the
    ability to enforce their rights when breached by servicers and to
    obtain adequate remedies.
        Yet few student loan borrowers have the ability to seek redress
    when servicers violate their rights. The few who are able to find a
    lawyer to assist them still face an uphill battle because the HEA
    provides no explicit private right of action to student loan borrowers
    who seek to enforce disclosure requirements or challenge a servicer's
    failure to comply with other obligations set out in Federal law.
    Borrowers can raise State law claims, including those based on fraud
    and misrepresentation, but servicers assert both that these claims are
    preempted by the HEA and that they are shielded from liability through
    derivative sovereign immunity. The Department can address this need for
    remedies both by broadening the cancellation provisions of IDR to
    ensure that borrowers get credit for time that should have qualified
    for a cancellation, more consistently and robustly compromising or
    modifying borrowers' loans, and supporting borrowers' efforts to recoup
    damages through private litigation by withdrawing its notice of
    interpretation on preemption \36\ and prohibiting its servicers and
    debt collectors from asserting preemption and governmental contractor
    immunity defenses.
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         \36\ Federal Preemption and State Regulation of the Department of
    Education's Federal Student Loan Programs and Federal Student Loan
    Servicers, 83 FR 10619 (March 12, 2018).
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    Conclusion
        With the impending transition of student loan servicing for tens of
    millions of student loan borrowers, it is critical that Congress and
    the Department of Education take proactive steps to ensure that
    borrowers are protected. As with most things, the most vulnerable
    borrowers are the ones who will be harmed the most. Low-income
    borrowers are vulnerable to unaffordable loan repayments, improperly
    debited payments, negative and sometimes erroneous credit reporting,
    and in many cases, the seizure of wages, Federal benefits, or vital tax
    credits. These consequences threaten the financial stability of
    borrowers, their families, and wider communities.
        In structuring both the plans to transfer millions of loans and to
    end the COVID-19 payment pause, the Department must give borrowers as
    many chances to get back on track as possible. But policymakers must
    also recognize that, for many borrowers, the harm from a bungled
    transition will come on top of years if not decades of abusive
    servicing and collection practices.
        Widespread administrative debt cancellation is needed to remedy the
    failures of our student loan system. The student loan system has failed
    borrowers for too long. While they have waited, their debt has
    ballooned, and their financial futures have grown more bleak. Over 4
    million borrowers have been in repayment for over 20 years, \37\ yet
    only 32 borrowers have had their loans canceled through income-driven
    repayment. \38\ In addition to widespread administrative debt
    cancellation, the Department should clear the books of borrowers who
    have been in repayment for more than 15 years, and automatically
    provide relief to all of the borrowers who are already entitled to
    cancellation under existing law. In addition to providing much needed
    relief to these borrowers, if done prior to restarting repayments,
    these steps will eliminate the debts of many of the hardest to reach
    borrowers and will allow servicers to dedicate their resources to
    ensuring the success of the remaining borrowers.
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         \37\ Laura Camera, ``Progressives Up the Pressure on Biden Over
    Student Debt Cancellation'', U.S. NEWS (April 14, 2021), available at
    https://www.usnews.com/news/education-news/articles/2021-04-14/
    progressives-up-thepressure-on-biden-over-student-debt-cancellation,
    citing Education Department Responses to Data Request by Senator
    Warren, (April 2, 2021) available at https://www.warren.senate.gov/imo/
    media/doc/education%20Department%20Response%20to
    %20Sen%20Warren%20-%204-8-21.pdf.
         \38\ Education Department's Decades-Old Debt Trap, supra n. 27.
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        Thank you for the close attention you are paying to how to protect
    student loan borrowers in the upcoming transitions in the student loan
    system, and for the opportunity to provide this testimony. I look
    forward to your questions.

                  Additional Material Supplied for the Record

    LETTER SUBMITTED BY SARAH DUCICH, SENIOR VICE PRESIDENT, PUBLIC POLICY
                       AND GOVERNMENT RELATIONS, NAVIENT

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