    [Senate Hearing 118-552]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-552

                MOHELA'S PERFORMANCE AS A STUDENT LOAN SERVICER

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

                                    HEARING

                                   before the

                                SUBCOMMITTEE ON
                                ECONOMIC POLICY

                                     of the

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

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                EXAMINING THE CORPORATIONS THAT HAVE BENEFITED WHILE
                       ADMINISTERING THE STUDENT LOAN PROGRAM

                                   __________

                                 APRIL 10, 2024

                                   __________

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

                     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

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

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    58-451 PDF                WASHINGTON : 2025

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                  Catherine Fuchs, Republican Policy Director

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                           Pat Lally, Assistant Clerk

                                     ______

                        Subcommittee on Economic Policy

                     ELIZABETH WARREN, Massachusetts, Chair

                    JOHN KENNEDY, Louisiana, Ranking Member

    JACK REED, Rhode Island              MIKE ROUNDS, South Dakota
    ROBERT MENENDEZ, New Jersey          THOM TILLIS, North Carolina
    CHRIS VAN HOLLEN, Maryland           CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                STEVE DAINES, Montana
    JOHN FETTERMAN, Pennsylvania

                  Gabrielle Elul, Subcommittee Staff Director

            Jennifer Newman, Republican Subcommittee Staff Director

                                      (ii)

                                C O N T E N T S

                                  ----------

                           WEDNESDAY, APRIL 10, 2024

                                                                       Page

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

    Opening statements, comments, or prepared statements of:

                                   WITNESSES

    Kathleen White, Retired, Former Faculty Member, City College of
      San
      Francisco......................................................     4
        Prepared statement...........................................    26
    Persis Yu, Deputy Executive Director and Managing Counsel,
      Student Borrower Protection Center.............................     5
        Prepared statement...........................................    29
    Jason Delisle, Nonresident Senior Fellow, Center on Education
      Data and Policy, Urban Institute...............................     7
        Prepared statement...........................................    54
        Responses to written questions of:
            Senator Kennedy..........................................    68
    Scott Buchanan, Executive Director, Student Loan Servicing
      Alliance.......................................................     9
        Prepared statement...........................................    58
        Responses to written questions of:
            Senator Kennedy..........................................    71
    Quinton Lucas, Mayor, Kansas City, Missouri......................    10
        Prepared statement...........................................    63

                                     (iii)

                MOHELA'S PERFORMANCE AS A STUDENT LOAN SERVICER

                                  ----------

                           WEDNESDAY, APRIL 10, 2024

                                   U.S. Senate,
      Committee on Banking, Housing, and Urban Affairs,
                               Subcommittee on Economic Policy,
                                                        Washington, DC.
        The Subcommittee met at 2:30 p.m., in room SD-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. Senator
    Kennedy is trying to cover two hearings at once, so he will
    join us when he can and maybe have to be a little bit in and
    out. You have got me the whole time now.
        I am holding today's hearing because I am concerned that
    student loan servicers are, once again, failing millions of
    borrowers. This is my third hearing on student loan servicer
    misconduct. My first one was my first hearing as Chair of this
    Banking Subcommittee. It was in April 2021, and at that hearing
    Senator Kennedy and I heard deeply troubling testimony about
    how student loan servicers were intentionally making
    misrepresentations to borrowers and preventing them from
    getting the relief that the law said they were entitled to.
        Now a lot has happened since then. PHEAA and NAVIENT, two
    of the student loan servicers that testified at our hearing
    have left the Federal student loan system as have other
    servicers. President Biden has moved to cancel student loan
    debt for 43 million Americans, and the extremist Supreme Court
    has blocked that relief for borrowers.
        But President Biden did not give up. By fixing existing
    programs he has already canceled student loan debt for nearly 4
    million borrowers, more than any President in history, and he
    has moved forward with Plan B, to expand debt relief to tens of
    millions more. In total, President Biden's actions, once
    finalized, will cancel student debt for 30 million Americans.
    That is 30 million lives that will be changed, and the lives of
    their families, the lives of their friends. This is important.
        So today we focus on servicers, the corporations that have
    made hundreds of millions of dollars administering the student
    loan program. Payments were paused during the COVID-19
    pandemic, and last year the pause ended and borrowers returned
    to payment. Now despite receiving numerous warnings and Federal
    funding throughout the payment pause to get ready, every single
    student loan servicer failed to adequately prepare for the
    transition back to repayment, every single one of them.
        A new report that I released today--yes, that as smoothly
    known as the visual--reveals that servicers badly misled
    borrowers during the return to repayment. These servicers made
    millions of billing errors and received thousands and thousands
    of borrower complaints. Servicers subjected borrowers to long
    phone waits, with some borrowers literally waiting for hours
    before getting hold of a live person, and that was true even
    when the servicer had made a mistake that could only be
    corrected by reaching a live person. Servicers had years to
    prepare for this transition to repayment, and they still
    screwed up.
        MOHELA was one of the worst. MOHELA serves over 8 million
    borrowers and is the only servicer for the Public Service Loan
    Forgiveness Program. MOHELA has caused problems for millions of
    people. First MOHELA's performance during borrowers' return to
    repayment was shockingly bad. After payments resumed in
    October, MOHELA sent the wrong bills to approximately 300,000
    borrowers--300,000 borrowers got the wrong amount in their
    bills--and they sent late billing statements to 2.5 million
    borrowers. MOHELA's failures led the Department of Education to
    withhold about $7.2 million in payments to MOHELA.
        Last year, I wrote to all of the servicers and to the
    Department of Education requesting information about the
    servicing problems facing borrower. The data I got back was
    truly shocking. The numbers showed that MOHELA had the longest
    average call wait time of any servicer. Now as borrowers once
    again begin to make payments, MOHELA had a call abandonment
    rate of 35 percent. Let me say that again. One in three MOHELA
    borrowers were on hold or shuffled around so long that they
    just finally gave up on their calls. Evidently, MOHELA figured
    out that if they made the call system impenetrable, MOHELA
    would not have to talk with so many people who were
    experiencing the problems that MOHELA had caused.
        Now maybe it is no surprise that MOHELA received the most
    complaints of any Federal student loan servicer in 2023. MOHELA
    has failed borrowers of all kinds, but it has been particularly
    derelict in its duties administering the Public Service Loan
    Forgiveness Program. PSLF is how we say thank you to teachers
    and nurses and servicemembers and firefighters and others who
    borrow money to go to school, then use their educations working
    in public service.
        Under MOHELA's watch, the backlog of PSLF forms hit a peak
    of 1 million. This meant that many teachers and nurses and
    firefighters did not get the relief that they were entitled to
    until much later, so late that some borrowers continued to make
    payments on debts that should have already been canceled.
        MOHELA knew that it had problems, and many of those
    problems caused borrowers to pick up the phone and call for
    help. Last month, a blockbuster report by the Student Borrower
    Protection Center and the American Federation of Teachers
    documented MOHELA's response to those calls. Instead of just
    hiring and training more people to help clean up the mess that
    it had made, MOHELA implemented a call deflection scheme. That
    meant that a firefighter or a teacher who called in would be
    diverted away from live agents to dead-end parts of its
    website. The borrower had no choice except to place the call
    again and hope that the second time around, or the third or the
    fourth or the fifth, they would get a better result.
        Finally, MOHELA played a central role in blocking President
    Biden's boldest attempt to fix this broken student loan system
    through litigation against the President's first debt
    cancellation plan. If it were not for MOHELA, 43 million
    borrowers might have gotten the student debt relief that
    President Biden laid out for them.
        Clearly, there are serious problems at MOHELA, problems
    that have an impact on millions of borrowers. So I invited
    MOHELA's CEO, Scott Giles, to testify today at this hearing and
    to provide Congress and the American people with some answers
    about what has gone wrong. He refused my invitation, a flat no.
        I want everybody to pause to think about what that means.
    His company gets paid hundreds of millions of taxpayer dollars
    to administer a Federal program, and his company's
    administration of that program is a mess. But instead of
    answering for his failures, Giles just goes into hiding. I do
    not understand why MOHELA should be let within 10,000 feet of a
    student loan program, and I think it is long past time that the
    Department of Education holds MOHELA accountable for its
    failures.
        I can assure you we are not finished here. We will get
    answers.
        At today's hearing we will learn more about MOHELA's
    failures, our broken student loan system, and the ways that we
    can fix it. Student loan borrowers deserve better than MOHELA.
        And when Ranking Member Kennedy comes in we will listen to
    his opening statement. In the meantime I am going to go to our
    witnesses, so let me start here. I am going to introduce all
    the witnesses and then we will go down the row.
        I am first pleased to introduce Kathleen White. Ms. White
    taught at a community college for 26 years before retiring
    recently. She is a union member with the American Federation of
    Teachers. She has firsthand experience with MOHELA's servicing
    failures. Thank you very much for being here, Ms. White.
        Ms. Persis Yu is the Deputy Executive Director and Managing
    Counsel at the Student Borrower Protection Center. She has
    dedicated her career to fighting on behalf of borrowers, and is
    an expert on the student loan servicing system. Thank you, Ms.
    Yu, for being here.
        Next, Mr. Jason Delisle, is a Nonresident Senior Fellow at
    the Center on Education Data and Policy for the Urban
    Institute. He previously served as the Director of the Federal
    Education Budget Project at New America, and was a Research
    Fellow at the American Enterprise Institute. Thank you for
    being here. Is it De-LEEL or De-LILE?
        Mr. Delisle. De-LILE.
        Chair Warren. De-LILE. I did get it right the first time.
        Scott Buchanan is the Executive Director of the Student
    Loan Servicing Alliance, which is the trade association for
    Federal and private student loan servicers. He has also worked
    as a consultant to financial services companies, and he has
    served as Vice President for NAVIENT, and held several roles as
    an officer for Sallie Mae. Thank you for being with us, Mr.
    Buchanan.
        And last the Honorable Quinton Lucas is the 55th Mayor of
    Kansas City, Missouri, representing over 500,000 residents.
    Previously he represented Kansas City's Third District at Large
    on the City Council. Thank you, Mr. Mayor, for being with us.
        So now I am going to turn to Ms. White for her opening
    statement. Ms. White, you are recognized for 5 minutes.

     STATEMENT OF KATHLEEN WHITE, RETIRED, FORMER FACULTY MEMBER,
                     CITY COLLEGE OF SAN FRANCISCO

        Ms. White. Good afternoon, Senator Warren, Committee
    Members and guests. My name is Kathleen White. I was the first
    in my family to attend college. I started at 16 years old and I
    paid for my own education. I began in 1973, and completed both
    a BA and MA degree.
        Both my husband I were middle-income public service
    employees with three sons who all attended college. Our family
    needed grants, scholarships, and student loans to supplement
    our tuition payments. Over 40 years I have paid $305,000 in
    student loan payments. They were ever-present, one generation
    to the next, and I was never in default.
        Thanks to my education I became a community college
    teacher. I taught future teachers. I loved my career. I chose
    to enter it, and I am grateful for my education, which allowed
    me the best career. I recently retired at age 65 after 26 years
    of full-time teaching.
        In 2017, I learned about Public Service Loan Forgiveness. I
    applied and was denied. I applied to Federal Loan Servicing. I
    was told I did not have eligible loan types. I was
    disappointed, because even at that date I had payments of $360
    a month, due through 2037, by the way. I would have been 81
    years old in 2037. I hope I still get there, but 81, still
    paying.
        In 2020, renewed outreach by student loan advocacy groups
    included assurances that PSLF applicants would be reconsidered
    with the new Federal administration. At that time I worked with
    AFT, my union, and with the student loan service, MeetSummer,
    which assists borrowers like me in navigating the system. I
    have loans serviced by Sallie Mae, NELNET, and later NAVIENT
    between 2008 and 2018. During this 10-year period I made 120
    on-time payments. In 2020, I still owed $29,000. I was informed
    that I needed to submit forms by October 31st, because there
    was a broader consideration of loan types and a waiver in
    place, and different types of loans would be considered and
    counted. I was excited.
        I was directed by Navient to MOHELA, the new servicer. I
    downloaded all the forms from the MOHELA website, and was told
    that only paper copies could be submitted. I met with
    MeetSummer and they faxed my forms in to MOHELA. I have proof
    of the faxes, one that arrived on September 16, and the other
    on October 5, 2022.
        That was the beginning of my saga. MOHELA was unable to
    answer my questions about my status as they were not able to
    track down those documents I had submitted. I had many
    questions about interest rates and my status as a retiree, and
    if I was eligible, and the types of loans I might be
    reconsolidated into. I called or emailed 30 times between
    November 22 to March 23. I was told by staff to wait 20 to 90
    days to call back. I was also told that there was new
    legislation and pending rulings, and they may not get to my
    forms until July 2023.
        NAVIENT also had no information. I was in a gray area in a
    lost land. I had no servicer.
        Call wait times to MOHELA often exceeded 1 to 2 hours on
    hold. Decreasing call center hours meant that I had to call at
    certain times because I was on the West Coast. Staff were in
    training without ability to accelerate complicated cases or
    address questions that deviated from standard general topics.
    All the employees were polite, and they were helpful, but it
    seemed like they did not have the tools to escalate to a
    supervisor or to answer questions like mine.
        Finally in March 2023, evidence of my PSLF appeared on the
    MOHELA site. I was then told I had to submit a new form to
    AidVantage, which I submitted. I was told there were recent
    changes to legislation and I may be eligible. I filed a
    complaint with the Consumer Financial Protection Bureau and all
    told I have to file seven complaints because I never got the
    answers I needed.
        Brevity is not my point here, so I will tell you that after
    the COVID pandemic pause I received a bill, despite thinking I
    was eligible for PSLF, $393 per month. I paid it. It was a hard
    check to write. I continued to pay in November and December.
        I finally received notification that they had received
    forms and that I was put on forbearance. That scared me because
    forbearance meant interest was still collecting, and I did not
    know if that meant I was eligible.
        Finally, on February 6, 2024, I received a form letter
    thanking me for my public service and indicating that my
    principal and interest totally $29,765 had been forgiven. I
    taped the letter to my front door and I cried.
        On behalf of every public service employee and every
    eligible teacher I am here to advocate for change. It should
    take a year-and-a-half to gain the public service forgiveness
    that we believe we are entitled to. Thank you.
        Chair Warren. Thank you, very much. Thank you, Ms. White. I
    appreciate you being here today. So sorry the travails and how
    long it took, but so happy you got to a good conclusion with
    it. Thank you.
        Ms. Yu, you are recognized for 5 minutes.

    STATEMENT OF PERSIS YU, DEPUTY EXECUTIVE DIRECTOR AND MANAGING
              COUNSEL, STUDENT BORROWER PROTECTION CENTER

        Ms. Yu. Thank you. Good afternoon, Chairwoman, Ranking
    Member, and Members of the Subcommittee. Thank you so much for
    inviting me here to testify today.
        My name is Persis Yu and I am the Deputy Executive Director
    and Managing Counsel of the Student Borrower Protection Center.
    Our mission is to alleviate the burden of student debt for
    millions of borrowers across the Nation.
        Addressing the student debt crisis is a critical racial and
    economic justice issue. Student loans were created to be a tool
    of social and economic mobility, to allow families, regardless
    of their race or economic status, to unlock the promise of an
    education. But for too many student debt has become a life
    sentence, preventing too many borrowers from starting or
    growing their families, buying homes, and saving for their
    future.
        This Administration has made unprecedented progress, using
    every tool available to it, to fix the student loan system and
    provide much needed relief. Nearly 4 million people are debt-
    free, and their lives are so much better for it. Earlier this
    week, the President unveiled further details of his plans to
    enact debt relief, using authority under the Higher Education
    Act, which could benefit 30 million borrowers.
        But we know that this unprecedented progress and momentum
    is gravely threatened by the same servicers that get hundreds
    of millions of dollars to help borrowers manage their payments.
        The Student Borrower Protection Center and the AFT put out
    a report we call the MOHELA Papers, which uncovered evidence
    from a years-long investigation into MOHELA, the primary
    servicer responsible for the Public Service Loan Forgiveness
    Program and the same servicer that was central in the Supreme
    Court case that robbed 40-plus million borrowers of debt
    relief.
        We found that at a time when tens of millions of borrowers
    are stretching their budgets and struggling to navigate a
    complicated and changing student loan system, more than 4 in 10
    MOHELA customers experienced a servicing failure. Instead of
    performing basic servicing functions such as providing
    borrowers with access to correct and timely information, MOHELA
    chose a complex call deflection scheme, a byzantine loop of
    misinformation and false promises.
        As the sole servicer administering the PSLF program,
    MOHELA's servicing failures particular harmed public service
    workers and prevent them from getting relief. Most recent
    Federal records show that under MOHELA the backlog of
    unprocessed forms grew, exceeding, at points, 1.2 million
    forms, and persisting for several reporting periods at more
    than 800,000 forms. Public service workers with eligible
    employment are getting denied. MOHELA sent incorrect bills to
    more than a quarter-of-a-million borrowers and failed to send
    bills at all to more than 2 million borrowers, pushing 800,000
    borrowers into delinquency.
        The call deflection scheme diverts borrowers away from
    customer service representatives, often to non-operative parts
    of MOHELA's website. Many of the servicing functions borrowers
    reach out for can only be performed by a live person. For low-
    income borrowers, this could be the difference between
    hundreds, if not thousands of dollars over this next year.
        Amidst a time of unprecedent confusion and uncertainty,
    millions of borrowers reached out only to be led astray. Today,
    you will hear from industry lobbyists paid to offer spin, point
    fingers, and attempt to shield MOHELA from public scrutiny.
    They will claim they do not have sufficient resources. But
    since the pandemic started, MOHELA tripled the size of its
    portfolio.
        Make no mistake--MOHELA made choices and must be held
    accountable for them.
        But MOHELA is just the latest bad actor. Borrower
    advocates, Federal and State regulators, law enforcement
    officials, and the Consumer Financial Protection Bureau have
    all documented a history of servicing misconduct and widespread
    failures across the industry. These failures create obstacles
    to repayment, raise costs, cause distress, and drive borrowers
    to default.
        The Department has taken some actions to hold MOHELA
    accountable. However, these actions fail to provide full and
    adequate remedy to those borrowers who have been harmed, and
    critically, they do not hold the company's executive
    accountable.
        Several States have consumer protection laws that should
    prevent unfair and deceptive practices, but services, MOHELA
    included, often attempt to evade accountability by asserting
    that these laws do not apply to them, claiming consumer
    protections are preempted by the Higher Education Act and they
    are shielded from liability through sovereign immunity.
        Today's hearing is an opportunity to hold MOHELA
    accountable. And while MOHELA's CEO could not muster the
    courage to appear before you today publicly, I point your
    attention to the borrowers in this room, at this table, and
    right behind me. These borrowers have taken time out of their
    busy lives, traveled away from their families to be here in
    hopes that this body will believe their lived experiences and
    bring an end to MOHELA's cycle of scandal, deception, and
    borrower abuse.
        It is time to cancel student debt, it is time to make
    college free, and it is time to fire MOHELA. Thank you.
        Chair Warren. Thank you. Thank you, Ms. Yu. Mr. Delisle.

     STATEMENT OF JASON DELISLE, NONRESIDENT SENIOR FELLOW, CENTER
             ON EDUCATION DATA AND POLICY, URBAN INSTITUTE

        Mr. Delisle. Chair Warren, Ranking Member Kennedy, and
    Members of the Subcommittee, thank you for the opportunity to
    testify about student loan servicing today. The views expressed
    in my testimony are my own and should not be attributed to the
    Urban Institute, its trustees, or its funders.
        Nearly all the student debt that is outstanding and that is
    issued is issued through the Federal student loan program, and
    as you know, the Government does not actually service these
    loans itself, even though it holds and makes them. It hires
    private companies to do that, to do most of, if not all, the
    interaction with borrowers. And so servicing plays a really
    important role in the smooth and correct functioning of the
    program.
        What I think is important to point out that there are other
    actors involved here, as well. Congress and the Department of
    Education also play a role in how the student loan program
    operates. And I think there are two ways in which the policy
    and administrative decisions that they have made have increased
    the risk and potential that borrowers are confused and
    frustrated, and that there are servicing problems.
        First, the student loan program is very, very complex. It
    has grown incredibly complicated, particularly in recent years.
    There are many different benefits, many different repayment
    plans. Many of these overlap. Many of them are mutually
    exclusive. If you use some of them you disqualify yourself from
    other benefits.
        All of this information and complexity require borrowers to
    understand a lot of information. It requires servicers to
    process a lot of information. It requires the Department of Ed
    to create a lot of rules and processes that they then convey to
    the servicers.
        So in addition to this complexity the Biden administration
    has made a lot of changes to the student loan program in recent
    years, and I think that, too, has increased the risk that
    borrowers are confused and frustrated and also the risk of some
    servicing problems. The Biden administration has issued waivers
    that have essentially rewritten the rules of existing student
    loan programs. They have created deadlines, which we have just
    heard about, that create servicing bottlenecks, as borrowers
    who were never eligible under the existing statutes, thousands
    and thousands of them, suddenly overnight become eligible, and
    they flood their servicer with calls and questions. And I am
    not surprised that there are significant delays.
        The Biden administration has also essentially created new
    programs in the student loan program, and the servicers have to
    administer those, the Department of Ed has to issue new
    guidance to servicers, and all of that creates a lot of risk of
    borrower confusion and frustration with the loan program, which
    is certainly what we have.
        So with my remaining time I am going to talk about a few
    ways I think the loan program can be reformed that will make it
    less prone to borrower confusion, frustration, and servicing
    problems.
        One, I think the program should be simplified--fewer plans,
    fewer benefits, fewer options. So for example, establish one
    income-driven repayment plan. There are four now. The Biden
    administration has added a new one, and it is the most
    complicated one created to date. And remove the Secretary's
    authority to create new income-driven repayment plans in the
    future. I think this will greatly increase the simplicity of
    the program and reduce risk of servicing problems.
        I would eliminate forbearance and deferment benefits in the
    program, using income-driven repayment to determine and ensure
    loans are affordable rather than these other benefits, which as
    we heard earlier, interact with Public Service Loan Forgiveness
    and interact with income-driven repayment in a way that
    frustrates and confuses borrowers.
        Another simplification, I think the program would work
    better if we eliminated interest. No interest on student loans,
    and instead the program charges one origination fee up front,
    so that borrowers' balances never grow, there is no confusion
    about how much they owe. What you owe is the balance when you
    begin your repayment.
        I also think that Congress should reclaim control over many
    of the features of the program. I think what we have seen under
    the Biden administration is programs very open-ended and the
    Administration has used the open-ended nature of the program to
    create a lot of new programs, and change terms retroactively in
    the program, and I think that has created the risk for a lot of
    servicing problems.
        Last, I think a major reform--this is a big one--I think a
    way of removing services altogether from the student loan
    program. One way to do that would be to collect student loan
    payments through the tax system. If you have an income-driven
    repayment system you can collect loans through the tax system,
    removing servicers, and I think creating a simpler program for
    borrowers.
        Thank you.
        Chair Warren. Thank you, Mr. Delisle. Mr. Buchanan.

     STATEMENT OF SCOTT BUCHANAN, EXECUTIVE DIRECTOR, STUDENT LOAN
                           SERVICING ALLIANCE

        Mr. Buchanan. Chair Warren, Ranking Member Kennedy, and
    distinguished Members of the Subcommittee, thank you for the
    opportunity to testify today. I am the Executive Director of
    the Student Loan Servicing Alliance, and we are a nonprofit
    trade association focused on helping student loan borrowers
    with their servicing needs. My members are a mix of companies,
    State agencies, and nonprofits. They serve over 95 percent of
    all student loan servicing in the country, including Federal
    and private loans. The work they do begins and ends with what
    is best for borrowers.
        I will start with some facts on how servicing works. Today
    the Federal Government originates all Federal student loans and
    contracts with servicers for several reasons. The Department of
    Education, or Ed, does not have the internal capacity to assist
    student borrowers. Therefore, it relies on contractual
    partnerships. We function as a utility, that does the day-to-
    day work for these programs. Working together collaboratively
    is the only path toward enhanced borrower success.
        Second, servicers are fee-for-service contractors. Ed
    servicers do not have any financial ownership in the underlying
    loans, and we do not set the myriad options available to
    borrowers, some of these shown here. They work at the direction
    of the Office of Federal Student Aid, or FSA, an office inside
    the Department of Education, and according to their contracts.
    Over the past few years, FSA has in writing cut services while
    repayment options have gotten more complex, all while the
    Government invests in servicing this massively complicated
    program, less than one-fifth of what a mortgage servicer is
    paid to manage a far simpler loan.
        Finally, political special interest groups and Government
    officials have gotten into the game of spinning false
    narratives about what servicers do, and then cajoling their
    Federal and State regulators to conduct oversight or make
    threats when servicers are simply performing the contractual
    duties specified by the Department. This kind of game has led
    seven other servicers to tell the Government they will no
    longer perform the work.
        The tautology here is that the CFPB and others are really
    saying that FSA itself is knowingly directing servicers to
    perform ``abusive actions,'' and then accusing of failing to
    meet phantom expectations that do not exist in our contracts.
        But we are really here likely because of a document
    produced by a political organization with false and misleading
    statements and phrases like ``dark history,'' ``company
    schemes,'' and ``uncovered documents.'' That kind of imagery is
    straight out of a John Grisham novel, but it is equally as
    fictional. Let's meet that with some facts.
        Some suggest that the servicer developed and implemented
    the strategy called ``deflection,'' and suggests they did so to
    harm borrowers. That is false. In fact, FSA mandated all
    servicers utilize this strategy and included it in their own
    playbook to servicers. This approach encouraged borrowers who
    can to self-service online rather than waiting to speak with a
    customer service representative. This was Government guidance.
        Recent accusations suggesting servicers are responsible for
    a large backlog of public service loan forgiveness applications
    and that the backlog is intentional are also false. Today, FSA
    makes all decisions about whether to approve or deny
    forgiveness, and so the vast majority of the backlog resides at
    a resource-constrained FSA, which is now also struggling with
    the massive FAFSA failures. The assertion that a servicer wants
    to engage in delays or rejections for its financial benefit is
    grossly unjust to the thousands of employees who work every day
    trying to help borrowers.
        But a better use of our time today would be an honest
    assessment of the challenge Federal servicers face and
    borrowers face and the steps we can work on together.
        First, fund quality service. For several years the
    Government has flat-funded servicing and customer support when
    borrowers most need it. Congress makes these choices through
    appropriations. The Government gets what it pays for, and when
    you do not make that choice then borrowers pay the price.
        Second, change the law to fix what is broken. Most of the
    complaints about the functioning of the loan program are
    matters of statute. There is this false trope that 99 percent
    of borrowers have been denied in the past for PLF forgiveness
    because of some mistake or operational failure. That is false.
    Congress designed the program to be intentionally drafted to be
    narrowly focused and harder to obtain the forgiveness.
    Servicers were tasked with implementing that law, and we did
    so. Even the Administration recognizes this fact, asserting it
    needed to use temporary emergency authority to bypass the law
    to provide this additional and expanded forgiveness. But that
    will end, and so Congress must act.
        Since my time is limited, I will close by saying that I am
    pleased to be here to have this conversation, but I hope it
    results in us working together to fix the problems that exist
    as opposed to just blaming servicers for simply doing what the
    Department asks and pays them to do, and what the law requires.
    Servicers care deeply about borrowers' experiences, just as you
    do, so let's focus on the root cause so we can do borrowers
    justice.
        I look forward to your questions.
        Chair Warren. Thank you.
        Mayor Lucas.

        STATEMENT OF QUINTON LUCAS, MAYOR, KANSAS CITY, MISSOURI

        Mr. Lucas. Thank you, Madam Chair. Thank you for your
    report and for having me here today. My name is Quinton Lucas.
    I am the major of Kansas City, a city of 508,000 people in
    Middle America, but a city where this challenge is reflected
    not just here but around the country.
        I am also a former MOHELA borrower, and I am the son of a
    student loan borrower, a single mother who went to community
    college, created opportunities for my sister and I, and as we
    struggled, as we persevered, I recognized the challenges that
    borrowers have faced every day.
        America's mayors, including myself, are on the front lines
    of the $1.7 trillion student debt crisis, because fundamentally
    what we try to create each day for our residents are more
    opportunities, opportunities to start businesses, to build
    their lives, to raise their families, without having to make
    choices between paying student loans and covering other debts,
    between buying the necessities in life that they need and
    paying those student loan obligations.
        The burden is especially strong for Black women in our
    city, on the east side of Kansas City, for Latinas on the west
    side of Kansas City. And this student debt crisis has
    perpetuated racial inequalities in my city and many others.
        Student debt relief and accountability fundamentally would
    alleviate the financial burden on our residents, helping
    families cover rising costs of living, and encouraging them,
    importantly, to invest in our local economics and their own
    futures.
        As mayors we are uniquely positioned to engage with local
    student loan borrowers each day, leveraging the local insights
    of existing social service programs and channels, and working
    to provide support direct services like financial coaching and
    nonprofit legal service partnerships.
        But we cannot do this alone. We are very simply asking for
    accountability, asking for accountability for service
    providers. While I am incredibly grateful for more than $138
    billion in student loan debt relief for 4 million Americans, I
    recognize that there are still, in my city alone, 80,000 Kansas
    Citians with $575 million of debt, that remains a limit and an
    impediment on their ability to succeed. By targeting
    accountability and relief to borrowers with the highest
    economic need this plan would have meaningful progress are
    reducing the racial wealth gap, which is an issue we continue
    to look for a solution for each day in all of our city halls.
        I also continue to hear stories from borrowers about
    student loan servicers. I remember some of my own. And do not
    get me wrong--I am blessed. I have been able to pay off my
    loans. I have been able to build a wonderful career. I want to
    create an opportunity for so many others to do so.
        You have already heard in testimony today the sometimes
    hours of wait times on phone calls, a 39-day average email
    response timeframe--39 days. When you are trying to decide how
    to live your life and to make choices, that is a fundamental
    impediment on your ability to look for more progress.
        We have heard more, posting incorrect monthly payments,
    misplacing records and payments, denying promised relief.
    Mistakes like these hurt borrowers. And by the way, borrowers
    are people. They are teachers. They are firefighters. They are
    nurses. They are moms. They are dads. They are us. They are our
    residents. And this is harm that causes harm to hundreds of
    thousands, if not millions, of Americans.
        Student loan servicers have one job--to support borrowers
    as they work to manage their student loan debt. And as all of
    us spend time thinking about how we can build economic
    development and activity in all our Americans, many of us
    recognize that accountability and cancellation of student debt
    would be the single largest investment in America's working
    people that we can today, with real benefits for everyone, and
    it would be equitable and right for America.
        Let me make one final point. Each day as a mayor we deal
    with all types of issues, ranging from violent crime to housing
    to everything under the sun. But who do we have working on the
    front lines to address those issues? Social workers, teachers,
    nurses, and we need a lot more of them in America.
        So we can spend all the time in the world thinking about
    the end run concerns, or we can address important issues now--
    very simple accountability, good service, quality service, and
    cancellation for those most in need. That is what would have
    helped my family when I was coming up, and that is what would
    help millions of Americans and thousands of Kansas Citians
    today.
        Thank you so very much.
        Chair Warren. Thank you. Thank you, Mr. Mayor.
        I will now yield to myself for the first round of
    questions--oh, this is going to be fun.
        As we have been talking about, MOHELA is one of the
    country's largest student loan servicers. Since joining the
    Federal system loan system in 2011, MOHELA has voluntarily
    signed contracts worth billions of dollars with the Federal
    Government. In the past few years, it has tripled in size, and
    today one out of every five Federal student loan borrowers--
    that is about 8 million people--has MOHELA as their servicer.
        Now the actual job of a student loan servicer is pretty
    straightforward. MOHELA is responsible for communicating with
    borrowers about their loans, processing their payments, and
    advising borrowers on their repayment options. That is it. And
    for 3 years during COVID, during the payment pause, MOHELA had
    a lot less to do than normal in many ways. Even so, the Federal
    Government faithfully paid MOHELA throughout the pause, sending
    them hundreds of millions of dollars so that when the payments
    came back online MOHELA would be ready to do its job and
    process those payments and advise those borrowers accurately.
        Ms. Yu, let's start with the sending out bills. That is how
    borrowers restart their payments. As we approached the restart
    last October, did MOHELA send billing statements to its
    borrower on time?
        Ms. Yu. No. MOHELA failed to send billing statements to 2.5
    million borrowers.
        Chair Warren. OK. So they did not even get them out the
    door on time for 2.5 million people. Then Ms. Yu, for those who
    did get their bills, did MOHELA send accurate bills?
        Ms. Yu. No. MOHELA sent inaccurate bills to approximately
    280,000 borrowers.
        Chair Warren. OK. So people were told they owed one amount
    of money, and in fact they owed a different amount.
        So after years of collecting money during the payment pause
    and plenty of time to get ready, and countless warnings from
    the Department of Education, from advocates, and from Members
    of Congress, MOHELA failed to do its most basic job.
        Messing up these loans matter. People struggled with
    budgeting and other financial commitments, and, according to
    the Department of Education, 800,000 of MOHELA's borrowers
    became delinquent on their loans because of the company's
    mistakes.
        Now when a loan servicer messes up, the borrower picks up
    the phone and calls to try to get those problems fixed. These
    are not problems that can just automatically be fixed online.
    So how did that work out?
        Ms. Yu, your organization, the Student Borrower Protection
    Center, conducted a years-long investigation alongside the
    American Federation of Teachers into MOHELA's performance as a
    student loan service. For people who had billing errors or
    other problems and tried to correct them on MOHELA's website,
    were they at least able to get it worked out?
        Ms. Yu. No. Borrowers who needed help with refunds or
    processing errors had to contact a customer service
    representative. In fact, MOHELA's own internal documents list
    28 different issues where self-servicing on the website is not
    sufficient. To make matters worse, MOHELA's website was missing
    key information and was oftentimes inaccessible to borrowers
    during the return to repayment.
        Chair Warren. OK. So they could not correct it online. In
    fact, if they tried to correct it online they often found
    inaccurate information. Is that right?
        Ms. Yu. That is right.
        Chair Warren. All right. So how about the people who
    actually then got on the phone? Were they able to straighten
    out their problems?
        Ms. Yu. There is a good chance that they would have been
    directed back to MOHELA's website.
        Chair Warren. So they were sent to the website that has
    mistaken information on it.
        Ms. Yu. That is correct. MOHELA set up a call deflection
    scheme, memorialized in its communications playbook from
    October 2023, which diverted borrowers away from customer
    service representative and directed them to the website.
        MOHELA even tried to prevent borrowers from contacting
    MOHELA in the first place by requesting that FSA not include
    their contact information on key pieces of information.
        Chair Warren. Wait. So they actually asked that no one be
    able to get the information so that they would be able to call
    them to correct the errors that MOHELA had made?
        Ms. Yu. That is correct.
        Chair Warren. This is just stunning. I just want to
    summarize what we have got here. MOHELA made errors in millions
    of borrowers' accounts, then actively worked to prevent
    borrowers from getting the help they needed by trapping them in
    these endless loops. MOHELA even had a name for it. It was
    called ``call deflection.'' And an internal email revealed by
    SBPC and AFT's report--I found this in your report--it shows
    that even MOHELA's general counsel worried that the public
    might find this just a little bit shady. No kidding.
        The Federal Government paid MOHELA millions of dollars so
    it would be ready to help people make payments once the payment
    pause ended. MOHELA messed that up for millions of borrowers,
    and then intentionally tried to dodge the calls that it would
    take to straighten it out. Shame on them. So thank you.
        Senator Menendez.
        Senator Menendez. Thank you, Madam Chair. For years my
    office has received outreach from dedicated public service
    employees, firefighters, police officers, teachers, and many
    others, who have expressed their frustration over the time
    taken to contact MOHELA for routine customer service issues. In
    fact, in a letter I wrote to Secretary Cardona last September,
    I noted the long wait times that my constituents had
    experienced when attempting to contact MOHELA representatives
    for any type of assistance.
        Mr. Buchanan, I heard your testimony in my office. I had
    another meeting going on, but when I saw you speak I wanted to
    hear what you had to say. You represent student loan servicers.
    Don't you think that a bare minimum a student loan servicer can
    do is to be responsive to borrowers' issues?
        Mr. Buchanan. Absolutely. I mean, this is one of the
    challenges that we face, and I too wrote a letter to Secretary
    Cardona about a year before resumption began, indicating that
    we needed guidance, we needed planning, we needed resources in
    order to make this work. Otherwise, we would face exactly this
    challenge. And so we worked with the Department of Education to
    try to get that guidance. It was not forthcoming in the way it
    should have been, and I think we need to continue to improve
    that. And that is where I think communication----
        Senator Menendez. So is it your testimony then the
    Department of Education is responsible for all the ills that we
    are describing here today.
        Mr. Buchanan. No, I did not say that. I believe----
        Senator Menendez. What are the ills that the servicers are
    responsible for?
        Mr. Buchanan. So I think at the end of the day we do make
    mistakes from time to time. When you are servicing more than 35
    million borrowers, in a complicated program that has more than
    four income-based repayment plans and all these sorts of
    things, we are going to make errors. In fact, the errors that
    were just talked about a second ago, I think there is really
    some mistakes to be said about them. Number one, with the issue
    of 280,000, those people were not billed incorrectly. They did
    not get a bill. If they looked online they were seeing that.
    But that was as a result of the fact that we got incorrect data
    from the Department of Education which had to be corrected.
    MOHELA self-identified and reported that to the Department and
    fixed that problem.
        We also sent out billing statements late. That is because
    we got guidance that was changing ever late. The playbook the
    Government gave to us was changed ten times in 1 month.
        Senator Menendez. I have heard basically. So far you are
    telling me everything that, again, not that the servicers did
    wrong but that the Government did wrong, so the Government is
    responsible for everything here. Even if a borrower cannot get
    their problem fixed, MOHELA and other student loan servicers
    need to be responsive.
        A student loan servicer's job is just that, to service. Now
    from what I have heard from constituents, it is outrageous
    that--you know, and you cannot have one thing. After 50 years
    of public life when I hear it once, OK. When I hear it twice,
    OK. But when I hear it with the frequency and the depth and the
    stories, then you know something is wrong.
        So, you know, I support additional funding for the Office
    of Student Aid, but I do not believe MOHELA is living up to its
    customer service commitments under its existing contract. I
    highlighted this issue 6 months ago. It is time to resolve
    these service issues once and for all.
        Last year, Senator Braun and I introduced the Bipartisan
    PSLF Fairness Completion Act to help dedicated public service
    employees get the student debt relief to which they are
    entitled. The legislation removes a technicality in Federal law
    that requires applicants be employed in a public service role
    at the time of the application for forgiveness, even if they
    already made the 120 qualified payments. That onerous
    regulation has negatively affected public service employees who
    completed the 120 payments, decided to retire, move on to other
    careers, and suddenly become ineligible.
        Ms. Yu, how would passing legislation like the PSLF
    Fairness Completion Act positively impact PSLF borrowers?
        Ms. Yu. Thank you, Senator. This is a truly heartbreaking
    issue that you raise. We hear from so many borrowers who have
    done their 10 years of public service, and now are trapped in a
    lifetime of debt because of this one requirement. This bill
    would be critical, and eliminating this provision would be
    critical to ensuring that so many public service workers who
    are trapped in debt, who have completed their 10 years of
    public service, would finally get the forgiveness they deserve.
        Senator Menendez. It seems like it is just.
        Now, currently 43 million people have outstanding student
    debt, totaling $1.6 trillion. Previously canceled student loan
    debt was considered taxable income by the IRS unless
    individuals who received debt cancellation would face a huge
    surprise tax bill. Senator Warren and I worked together on
    this, and I am proud that our Student Loan Tax Relief Act,
    included as part of the American Rescue Plan, saved these
    individuals who got loan forgiveness from being hit with tax
    consequences and surprise taxes.
        But the provision sunsets in 2025, and I am worried that
    any forgiveness of student debt--and see, the President is very
    much engaged in trying to maximize it--will result in a
    burdensome tax bill.
        What would be the consequences for borrowers if we let this
    provision expire?
        Ms. Yu. Thank you. I am incredibly concerned about letting
    this provision expire. The consequences would be severe.
    Borrowers with disabilities, low-income borrowers, will trade
    an unaffordable student loan bill for an unaffordable tax bill.
    These provisions absolutely need to be extended.
        Senator Menendez. Thank you. Madam Chair, may I ask one
    more question.
        Chair Warren. Of course.
        Senator Menendez. Thank you. In a letter I wrote to
    Secretary Cardona last year, I noted that many borrowers had
    reported that they did not receive credit for all the
    qualifying PSLF payments they had made, and some borrowers who
    had been approved for forgiveness reported long wait times to
    actually get the refunds to which they were entitled. Sadly,
    since I wrote to Secretary Cardona nearly 6 months ago, it
    seems these issues are still widespread.
        Ms. Yu, from your organization's conversations with
    borrowers, are you still hearing that these issues exist?
        Ms. Yu. Yes. Yes, Senator, we are absolutely still hearing
    that these issues exist. In fact, we know of a borrower from
    your State of New Jersey who has been, for going on 3 years
    now, trying to get their PSLF issues resolved with MOHELA. They
    have spent countless hours on hold, speaking to various
    different folks, have submitted all the required paperwork, and
    they have been promised over and over again that they would get
    a response in 15 days, only to be forced to wait for months.
        These borrowers report feeling hopeless, and that the
    promise of PSLF will be forever out of reach for them.
        Senator Menendez. Well, 3 years. Three years. I would like
    to have our office work with you to identify that constituent
    and see if we can help them. But it should not take the
    intervention of a United States Senator to deal with that.
    People who are eligible to have their debt canceled under the
    program should not be forced into repayment due solely to
    MOHELA's processing delays. And we look forward to reaching out
    to you and see if we can help this one constituent. But we need
    to better across the board.
        Thank you, Madam Chair.
        Chair Warren. Thank you, Senator Menendez.
        Senator Van Hollen.
        Senator Van Hollen. Thank you, Madam Chair, and I thank all
    of you for your testimony and your work on this important
    issue. Senator Warren, thank you and your team for your
    investigation into these important issues.
        Ms. Yu, I would like to ask you a question about Parent
    PLUS loans, and thank you for working with me and my office on
    trying to address that very important piece of this loan
    puzzle.
        As you well know, there are almost 4 million borrowers with
    Parent PLUS loans. Many are low-income borrowers and parents of
    color, trying to help their children achieve the American
    dream. Too many of these borrowers are struggling under the
    weight of unaffordable payments and ever-growing interest, due
    to the lack of access to the affordable repayment plans.
        Some parent borrowers are able to access SAVE, which is, as
    you know, the Administration's newest repayment plan, through a
    very cumbersome process called double consolidation. This
    process is heavily dependent on servicers to ensure that
    borrowers are correctly informed of the necessary steps and
    actually placed on the plan. MOHELA is one of those services.
    There are other services, but in our experience we have
    challenges across the board when it comes to informing parents
    about the options, and expanding the options.
        Ms. Yu, have you heard from borrowers who are struggling to
    navigate this process, and could you detail some of the
    examples?
        Ms. Yu. Absolutely. Thank you, Senator, for raising this
    critical issue. As you said, Parent PLUS borrowers for so long
    have been ignored and left out of critical relief. For over 10
    years I was a legal services attorney and worked on behalf of
    low-income student loan borrowers, and I heard so many stories
    of parents having to make the dire choice between their own
    finances and their children's futures.
        It is fundamentally unfair that Parent PLUS borrowers are
    forced to jump through these hoops, and even worse, when
    servicers fail to offer the critical information to let them
    know how to go through every single process, it is a
    complicated process, as we have heard. But servicers are paid
    hundreds of millions of dollars to work with these borrowers,
    and they have failed them, and we hear too many borrowers who
    have been told that these options are available only to have
    them denied. And it makes their loans unaffordable and puts
    them at dire risk of not being able to save for retirement, and
    for some people they just cannot retire.
        Senator Van Hollen. Well, thank you, and it has been good
    to work with you on this. Can you suggest some other paths for
    relief that we might propose for these borrowers?
        Ms. Yu. Absolutely. The lack of affordable options for
    Parent PLUS borrowers is just devastating, and it leaves to
    many borrowers to default. It makes them vulnerable for wage
    garnishment, to lose their Social Security benefit. We need to
    have options so that Parent PLUS borrowers are able to access
    the same kinds of affordable repayment plans as all borrowers.
        Senator Van Hollen. Well, we are working on that, and thank
    you for your help. And to Mayor Lucas, thank you for your
    testimony. I was able to catch some of this remotely. What
    impact does this intergenerational debt--right, we have talked
    about the impact on student loan, but when you are talking
    about Parent PLUS loans you are sometimes talking about
    intergenerational debt. Both the parents and the students have
    these heavy, heavy burdens.
        What impact does that intergenerational debt have on these
    borrowers and their families, and how does that contribute to
    the racial wealth gap?
        Mr. Lucas. When you look at the racial weal gap, in Kansas
    City or any American community, it is often generated by the
    fact that in some families, predominantly White, they have been
    able to pass down some of the benefits of wealth, of home
    ownership, of much of the American dream. Here we are building
    an ongoing opposite effect, where both the younger borrower,
    the children, are running into long-term concerns and
    inabilities to be able to launch new businesses, to invest in
    the necessities of life, to purchase homes. And the parents
    themselves are seeing an eradication of whatever wealth they
    may hold, or ultimately finding themselves in another debt
    situation, creating that sort of situation where not only do we
    lack the familial support that so many see, but instead we are
    seeing generational, familial burdens around that same thing,
    which is the search for the American dream.
        And so for us we spend so much time--and I grew up in a
    family like this, telling folks to get an education, to do
    right, to buildup their communities. And here what we are doing
    with these Parent PLUS loan programs and these failures, both
    in accountability but also to provide debt relief, we are
    creating burdens that keep them trapped, not just for a short
    term but generationally, in connection with their ability to
    try to at least accomplish the American dream.
        Senator Van Hollen. Right. And so, Madam Chair, I look
    forward to working with you on the Parent PLUS loan. And as
    you, Mr. Mayor, pointed out, it is not only the families. It is
    bad enough that you have that drag on two generations, but it
    also has a very negative, spiraling impact on everybody else
    who is part of that community and part of that economy. So I
    thank all of you for your testimony today, and again, Senator
    Warren, thank you for your focus on this very important issue.
        Chair Warren. Well, thank you Senator Van Hollen for how
    persistently you have attacked this problem and been there in
    support of people who are struggling with these loans, and
    particularly focused everyone's attention on Parent PLUS loans,
    and the kind of squeeze that it puts families under. I
    appreciate it, and we have got more work to do.
        Senator Van Hollen. We do.
        Chair Warren. So thank you. I have some questions I want to
    ask about PSLF, but I want to make sure, before we move on, I
    want to pick up on a point that Mr. Buchanan raised in his
    opening testimony and that Senator Menendez focused on.
        Before we move on I just want to explore the argument that
    the Federal Government's student debt program is just too
    complicated for servicers to manage properly, that that reason
    it is such as mess at MOHELA is the fault of the Government.
        Ms. Yu, I just thought maybe I would give you a chance to
    respond to that argument. Do you think that servicers should
    not be held accountable for their failures because our system
    is just too hard?
        Ms. Yu. Absolutely not. These servicers knew what they were
    signing up for. Their job is to help borrowers navigate the
    complexities of the student loan system. They get paid hundreds
    of millions of dollars each to do that job. If they fail to do
    that job well, they should be held accountable.
        Chair Warren. Thank you. You know, back in 2007,
    Republicans and Democrats got together to create this Public
    Service Loan Forgiveness program. It was signed into law by
    President George W. Bush. And the idea was if you had to borrow
    money to go to school, and then you took that education and
    instead of going out into private industry and maximizing the
    amount of money you made, you actually put it to work in public
    service, as a teacher, as a nurse, as a firefighter, you work
    for municipal government. Then America would cancel your debt
    at the end, if you had not been able to pay it all off, and it
    was really just a way of saying thank you, thank you for your
    many, many years of service.
        So Ms. White, I understand that you took out student loans
    so that you could become a teacher, and that then you also took
    out student loans because you were a parent, and trying to help
    your children make it through this process. And I understand
    that you paid back, your loans and your children's loans, it
    says here for 40 years. Is that right?
        Ms. White. That is correct, $300,000.
        Chair Warren. $300,000 that you paid back.
        Ms. White. Correct.
        Chair Warren. So back in 2017, Betsy DeVos is head of the
    Department of Education, Donald Trump is in the White House,
    you decided to apply for the Public Service Loan Forgiveness
    program. And at that point how long had you ben working in
    public service?
        Ms. White. Well, I worked a total of 26 years full-time,
    and at that time I was eligible, I would have been eligible,
    and I had a balance of $65,000.
        Chair Warren. Right. So you had $65,000 still remaining,
    but you had done enough qualifying payments, and they had all
    been in public service. OK.
        So did the Trump administration approve your PSLF loan
    cancellation application?
        Ms. White. No, they did not. I was told I had a variety of
    loan types, and I was not eligible, but I was not given any
    information about how to respond or follow up or reapply.
        Chair Warren. So what did you do?
        Ms. White. Well, I kept paying.
        Chair Warren. You just kept paying.
        Ms. White. I kept paying $300-and-something every month.
    And I thought that was pretty striking that I would still be
    paying until my 81st birthday. I do think it is problematic
    that seniors who are in public, who I believe had an
    entitlement to public service relief, based on my job and my
    on-time payment history, would be in that situation.
        Since you did call on me I do want to say that I carry
    around lots of files, but this only for the last year-and-a-
    half. These are all the communications and printed emails I
    received as I tried to achieve public service relief. So it
    took a year-and-a-half, and I do think that people should not
    have to be as persistent as I am. I think it should be easier.
    And a year-and-a-half is just too long.
        Chair Warren. So let me just ask a little bit about that.
    So in 2017, the Trump administration just turns you down.
    President Biden then gets sworn in and says we are open for
    business again. Come on back on your PSLF loan. We want to help
    people who have been in public service. So you went to MOHELA,
    right?
        Ms. White. I was sent to MOHELA----
        Chair Warren. MOHELA, that was now your servicer.
        Ms. White. NAVIENT was my servicer, and they said they did
    not do that.
        Chair Warren. We are done, so go to MOHELA, which now
    covers all of the public service loan programs.
        Ms. White. Right.
        Chair Warren. They said go to MOHELA, MOHELA will take care
    of this, and how long did it take you to get it straightened
    out with MOHELA?
        Ms. White. A year-and-a-half from my first submission of my
    employment certification form and my loan consolidation form.
    It was a year-and-a-half.
        Chair Warren. So a year-and-a-half after you have been in
    public service at that point for how long, did you say?
        Ms. White. Oh, 26 years.
        Chair Warren. Twenty-six years.
        Ms. White. And I filed many complaints. Everywhere I could
    complain to I complained. I think the only advantage I had was
    that I was persistent. But many public service employees do not
    have the ability to be this persistent.
        Chair Warren. Yeah. I believe in persistent women.
        Ms. White. It should not be that hard.
        Chair Warren. It should not take that level of persistence
    in order to get your cancellation. And I am just going to wrap
    up with this section, to ask you, Mayor Lucas. Can you just say
    a word about how benefits from this student debt cancellation?
    Sometimes we hear oh, it is only people who have plenty of
    money. After all, they are all college graduates. Can you just
    talk about this a little bit, from what you see right there in
    Kansas City?
        Mr. Lucas. The beneficiaries are the working people of our
    communities who provide vital public services each day. I will
    give two very brief vignettes from just this week. I have a 3-
    year-old son, very cute, very fun, but can get into danger
    sometimes, as all parents know. He broke his arm. We were at
    the Children's Hospital in Kansas City. We were there in the
    emergency room late at night. Nurses, nurse practitioners,
    other medical professionals, those are the ones that are doing
    the work to make sure myself and my community are safe. That
    was just one set.
        The next night, coincidentally, we had an officer in the
    hospital who had been shot. Once again, I had a chance to talk
    to the people in the hospital--the officer is doing OK, by the
    way--who are the ones who have taken on these obligations to
    particular in an inner-city medical environment.
        So much of this program is not about just people having
    wonderful opportunities and ways to make more money, but it is
    allowing us to direct public servants and public service to
    areas that need them vitally. So for me, the mayor of a city
    that has--and every city has challenges--but major inner-city
    hospitals and schools, and needs for prosecutors and so many
    other, and social workers. As I mentioned before, this is how
    we get the health care we need in major American cities and
    rural communities. This is how we get educators in States like
    mine, Missouri, home of the MOHELA organization, this is how we
    get people to go to rural communities. This is how we get care
    and services.
        So the beneficiaries are, frankly, all of us, and the
    losers, when you see programs like this, indeed, are all of us
    when we do not have cancellation, when we do not have
    accountability. That is why this matter to me, and I think it
    matters to so many people who are here today.
        Chair Warren. Thank you very much, Mr. Mayor, and thank you
    for your advocacy on behalf of the people of Kansas City. They
    are lucky to have you.
        Senator Warnock.
        Senator Warnock. Thank you, Chair Warren, and thank you for
    your leadership on this issue. You and I have been pushing,
    along with others, on this very hard, and it was great to see
    the President's announcement yesterday, with one hand tied
    behind his back. President Biden and the Biden administration
    has provided over $146 billion in student debt relief for over
    4 million Americans, and yesterday's announcement will be on
    top of that. That is a historical accomplishment that not only
    helps close the racial wealth gap but helps boost our entire
    economy, because as the mayor has pointed out, we all benefit.
    We all benefit when more people can afford to buy their first
    home, when they can save for retirement, or when they can start
    a small business, which contributes to our overall economy.
        But I want to talk about how the Administration's hand got
    tied behind its back in the first place, and the ongoing
    threats to debt relief for those who, in my view, are quite
    short-sighted.
        Ms. Yu, you are a student loan lawyer. When the Missouri
    attorney general worked with other Republican AGs to sue the
    Biden administration and block its first attempt at broad debt
    cancellation, why did the Supreme Court allow the case to
    proceed if student debt relief does not harm anyone?
        Ms. Yu. Thank you, Senator. The Missouri attorney general
    argued that the State of Missouri would be harmed because
    MOHELA could lose loan volume if borrowers received debt
    relief. So essentially, what the Missouri AG argued was that it
    and MOHELA benefited financially when 45 million borrowers
    remain in debt.
        Senator Warnock. So the folks who were supposed to be
    providing support servicing these loans, representing their
    constituents, said that it would be against their best
    interests. Am I understanding correctly?
        Ms. Yu. That is correct.
        Senator Warnock. So what was MOHELA's response when the
    Missouri AG hid behind them to get in the courtroom door to
    block that relief for millions of Americans?
        Ms. Yu. They stayed silent, Senator. They were complicit.
        Senator Warnock. And when given the chance to stand up in
    court for the student loan borrowers who they are contractually
    bound to serve, did they stand up for them? Did they serve
    them?
        Ms. Yu. They did not.
        Senator Warnock. I think it is important for everyone to
    understand the role of one student loan contractor, and the
    role that they had in blocking debt relief for millions of
    Americans. Of course, they are not alone. Others bear
    complicity in this. Especially since the company currently
    enjoys a contract right now with the Department of Education
    worth millions of taxpayer dollars.
        But this is not just a history lesson to everyone. I am
    concerned that the past is prologue. Earlier this year, the
    Biden-Harris administration announced plans to provide $1.2
    billion in relief for nearly 153,000 borrowers through a new
    repayment plan with a shorter path to forgiveness, and on
    Monday, as I pointed out, the Administration announced that it
    would do debt relief for 30 million more Americans through
    alternative paths, after the Supreme Court blocked one legal
    pathway, thanks, in part, to MOHELA.
        But just yesterday the Missouri AG already launched another
    lawsuit. So I think of all the things I think we need attorneys
    general to be engaged in to protect their constituents.
    Somehow, Missouri's attorney general wakes up in the morning
    and thinks this is the great service, that the people of
    Missouri and the people of this country need, what we need is
    the attorney general blocking debt relief under the new
    repayment plan.
        Ms. Yu, has MOHELA taken any steps since yesterday's
    announcement to distance itself from a new effort to block
    relief under the new repayment plan and harm the student loan
    borrowers it is charged with serving?
        Ms. Yu. It has not.
        Senator Warnock. Do you think, based on this, taxpayers
    should continue to pay them millions of dollars to serve
    student loan borrowers?
        Ms. Yu. No, I do not.
        Senator Warnock. Thank you so very much.
        Ms. Yu. Thank you.
        Senator Fetterman [presiding]. Well, I am the Chair now.
        Senator Warnock. Chairman Fetterman.
        Senator Fetterman. Anyway, yeah, so Mayor, congratulations
    on the Super Bowl, right? Yeah, wow. How many have the Chiefs
    won?
        Mr. Lucas. So we have won three since I have been mayor. We
    have won four, total.
        Senator Fetterman. That is fantastic. And I know, I mean,
    Pittsburgh we have six, and it is really great.
        Mr. Lucas. We are catching up.
        Senator Fetterman. There might be a little bitter here, you
    know, but yeah. Anyway. Well, I want address what seems to be
    the elephant in the room. Now it seems to me people in the room
    wearing red shirts, and it seems like they are PG-13 versions
    of perhaps, I don't know. And those shirts say what, the red
    shirts?
        [Unidentified Voice.] Fire MOHELA.
        Senator Fetterman. OK. Fire MOHELA. So could any of the
    experts here on the panel, can we explain why we have people
    willing to wear shirts, they made them and everything, so I
    think they probably have an important point. So anyone want to
    address that?
        Ms. Yu. I am happy to go first. After we released our
    report, the MOHELA Papers, we heard from hundreds of borrowers
    that this report spoke to their lived experiences, that MOHELA
    has more complaints at the Consumer Financial Protection Bureau
    than any other servicer. MOHELA has more than----
        Senator Fetterman. More than any other?
        Ms. Yu. That is right.
        Senator Fetterman. More than anyone, OK.
        Ms. Yu. That is right. Four in 10 of MOHELA's customers
    have experienced a servicing failure. Borrowers experience need
    to be listened to, and the borrowers are here to say that
    MOHELA has done them wrong and must be held accountable.
        Senator Fetterman. Anyone one else like to weigh in on
    that? I mean, I think it is remarkable that we have shirts here
    and everything. It seems pretty compelling. I mean, if it has
    the most complaints of any other agency.
        Mr. Buchanan. Well, if I might, Senator, this is one of the
    challenges of running the student loan program, right, is that
    the Government requires infrastructure and support. And I think
    one of the rhetorical issues here is I, too, having read that
    report, would find it deeply disturbing if it were true. The
    challenge is that it sort of misleads dramatically and makes
    many false statements. In my opening statement I covered a lot
    of that. My written testimony goes into that.
        I think the real question is how do we get to a servicing
    environment that is meeting the expectations? Number one, the
    Government has got to partner with servicers, to work together
    to improve these things. So we have had servicers have leave.
    Seven of them had said to the Government, ``Thanks but no
    thanks. We do not want to work for you anymore.'' And
    continuing that process just means we are churning as opposed
    to improving, and that is what we need to work on.
        So I think working together we can talk about how do we get
    the Department of Education to partner with servicers to issue
    guidance in a timely fashion, for the Government to get
    sufficient resources so we can do that outreach. That call hold
    time and call center hours that were cut, that was at the
    Department's direction, because they did not have sufficient
    resources. That was not a servicer choice. And these are the
    kinds of things we need to work together on.
        So rather than having these sorts of hyperbolic reports
    that really do not say anything substantive, we need to work
    together on what the actual true nature and architecture of the
    program is. And I look forward to being able to talk about that
    further with you.
        Senator Fetterman. Yeah, well, I have anecdotes from my
    constituents that had that same kind of situation, and it is
    very frustrating and it is very disappointing, as well, too,
    even if they are looking to pay their loans off. And they make
    it more difficult and they increase it without any reason. And
    I just cannot imagine why you would want to make it more
    difficult, or want to work to make it better, as well.
        And now I think my colleague from Georgia made a point
    that, is it safe to say that every time the President now tries
    to cancel some debt, and there is an AG from random States to
    challenge, right? Is that a fair--yes?
        Mr. Lucas. That is correct. Being from that same State,
    none of us have asked the attorneys general to intervene, and I
    believe as we have heard today----
        Senator Fetterman. Yeah. I have never met anyone saying,
    ``No, please don't cancel my--.''
        Mr. Lucas. There is nobody in Kansas City, nobody in St.
    Louis or anywhere in the State who has been asking. And I think
    what we are seeing, and we are seeing today, is how many people
    nationally are impacted. But they are looking to get standing
    to continue to bring these challenges based on the relationship
    between MOHELA and the State of Missouri, but really the harm
    extends far beyond it. It is purely political, and I think it
    is purely ``anti'' all of the people in red shirts behind me
    and the millions more who are impacted by it.
        Senator Fetterman. Yeah. And now since that I am Chairman I
    am going to give myself more time. At any rate, and it is clear
    that any time the President makes a move to give some relief to
    students, and then there is going to be a lawsuit, and
    generally some of those kinds of cases may end up being at the
    Supreme Court. And now it seems to me that the Supreme Court
    has been really overly political, and it seems to me going to
    be making it more and more difficult to even deliver that kind
    of aid, as well.
        And we moved much quicker for the Silicon Valley Bank was
    in collapse. You know, it was like how much can we do? How much
    can we do. And I do not think any of these borrowers could have
    crashed the American economy, you know, one of their loans. But
    I do not know why there seems to be no outrage for that, but
    they seem to be that if we are going to deliver some aid for
    students in this. I do not really understand that, but it is
    troubling and it underscores that, in my opinion, over-
    politicizing the Supreme Court.
        But regardless, I just thank all of you, and those of you
    that came to make a point, wearing your shirts, and others that
    are here, as well. And I guess I believe I am the last speaker
    as well, too, and thank you.
        Well, are going to a brief recess, and then we have a
    couple more, until my colleague from Massachusetts returns. OK
    then, so I apologize for that.
        [Recess.]
        Chair Warren [presiding]. This hearing is back in session--
    used a law that said in a pandemic the President could, and I
    am going to quote, ``waive or modify student loans.'' Now we
    all know what happened next. An extremist Supreme Court, the
    same court that overturned Roe v. Wade, twisted the plain
    meaning of the law and ripped away debt cancellation from 43
    million Americans.
        The less-told story, MOHELA, was at the center of all of
    it. The Republican States challenging President Biden's plan
    basically could not explain how they were harmed by student
    debt cancellation, and without an explanation of how they were
    harmed they did not have legal standing to sue. So their answer
    was MOHELA.
        Mayor Lucas, why was MOHELA so critical to the lawsuit that
    blocked President Biden's first step cancellation plan?
        Mr. Lucas. Well, Madam Chair, I would never pretend to tell
    the law to a law professor, but the issue as you have
    articulated refers to standing. And the argument was because
    MOHELA, the Missouri Higher Education Loan Authority, was
    established by the State of Missouri, they would lose business
    as a servicer if the debt cancellation were to go through. That
    then would create harm, not just to MOHELA but to the people of
    Missouri, which is counterintuitive for any normal person or
    Missourian, and that was, at least in the eyes of the court,
    sufficient to establish that standing or allow the lawsuit to
    proceed.
        Chair Warren. Yeah, exactly. Nice explanation for a really
    twisted argument here, but it was enough to persuade the
    Supreme Court.
        MOHELA is the only Federal student loan servicer that
    considers itself to be part of a State. In court filings and in
    public letters, including as recently as 2 days ago, MOHELA has
    repeatedly said that it is, quote, ``an arm of the State of
    Missouri.'' This is important because in MOHELA's view its
    public status affords it special privileges, including the
    privilege of not having to answer to borrowers who have been
    harmed by MOHELA's servicing errors.
        Ms. Yu, last December, borrowers brought a class action
    lawsuit against MOHELA, arguing that MOHELA had failed to
    process the Public Service Loan Forgiveness applications in a
    timely way, very much like what happened to Ms. White, and that
    is cost people money. Can you help unpack MOHELA's argument
    here? Why would MOHELA respond by saying, ``Stay away from me.
    I'm part of the State of Missouri''?
        Ms. Yu. Well, under the Constitution, State governments
    cannot be sued for violating the law unless they consent to
    sue. So what MOHELA is trying to argue here is that because
    they were created by the Missouri State legislature it is,
    therefore, immune from consumer protection laws.
        Chair Warren. So they just say--I just want to make sure I
    have got this straight. MOHELA agreed to follow all of the
    Federal, State, and local laws in the contract that it signed--
    it voluntarily signed this contract, for which it gets paid,
    this contract with the Department of Education. And it signs a
    contract--I just want to be clear here--is the contract that
    MOHELA signed any different from any other student loan
    servicers?
        Ms. Yu. It is not.
        Chair Warren. Nope. So they make exactly the same
    representations and the same commitments. And just like every
    other student loan servicer, MOHELA got paid millions of
    dollars on these contracts. But unlike any other student loan
    servicer, MOHELA now claims it cannot be sued even when it
    takes the money and fails to do the job.
        So let me start it this way. Is there anyone testifying
    here today who thinks that MOHELA should not be required to
    comply with the same laws and the same obligations as every
    other student loan servicer. I see no one. All right.
        I just want to say, I am very concerned that MOHELA is
    trying to hide behind its quasi-public status to evade
    responsibility for its servicing failures and to try to duck
    out on the harm that it has inflicted on public servants. I had
    hoped that the MOHELA CEO would be here in person to explain
    his side of the story. So I am disappointed that he refused to
    attend. I will continue to press for answers on this.
        The Department of Education has created new performance
    standards for servicers. I understand there are many servicers
    who have complained about that. But the Department has said you
    have got to meet higher standards here. Now what is critical is
    the Department of Education needs to enforce those standards to
    the letter.
        MOHELA has repeatedly failed millions of borrowers, and it
    is time for real action and real accountability.
        So with that I want to thank all of our witnesses for being
    here today. I very much appreciate you taking your time to come
    here. Questions for the record from other Senators are due 1
    week from today. That is Wednesday, April 17. For our witnesses
    you will then have 45 days to respond to any questions that
    have been submitted. And with that this hearing is adjourned.
        [Whereupon, at 3:55 p.m., the hearing was adjourned.]
        [Prepared statements and responses to written questions
    supplied for the record follow:]
                      PREPARED STATEMENT OF KATHLEEN WHITE
         Retired, Former Faculty Member, City College of San Francisco
                                 April 10, 2024
        Good afternoon, Senator Warren, Committee Members and guests, My
    name is Kathleen White, and I am here to share my experiences as a
    student loan borrower. I began college in 1973 at the age of 16 after
    graduating from high school. I was the first in my family to attend
    college and I paid for college attendance. As such, I utilized student
    financial aid in the form of grants, scholarships, and student loans. I
    attended San Francisco State University and obtained my BA in 1978 and
    an MA in Education in 1982. At the time my graduation, I was a parent
    of a toddler and had another child on the way. My husband was also a
    student at SFSU and utilized his Veterans Benefits, granted after 4
    years of service as a U.S. Navy Frogman, as well as student loans. We
    have been married for 45 years and sent three sons to college. We were
    both proud public service employees, and a moderate-to-middle-income
    family, and as such, needed assistance to finance college. Our sons
    attended college through a combination of our payments, obtaining
    scholarships, and student loans. In total, over 40 years, I have made
    $305,000 in student loan payments. Student loan payments were ever-
    present from one generation to the next. I remain grateful for the
    support that I received to finance college and am proud to say that I
    was never in default, despite financial challenges, and that I have
    always paid my debts and obligations.
        My college education allowed for me to engage in the best career
    that I could have imagined. I was employed full time as a tenured
    faculty member at a public community college for 26 years (from 1995 to
    2021). I taught future teachers interested in careers with children and
    youth in education in a range of ECE and K-12 settings. I served as a
    Department Chair and calculated that I have taught over 25,000 students
    in my career. I also worked as a part time faculty member and full time
    at a children's nonprofit for 10 years prior.
        In 2017, I was made aware of the Public Service Loan Forgiveness
    Program. I had been making student loan payments between for well more
    than a decade. I submitted an Employment Certification Form from my
    school district in 2017 to loan servicer Federal Loan Servicing. On
    November 14, 2017, I was sent a form letter from FLS, indicating that
    my Employment Certification Form was not evaluated, as I did not have
    eligible student loan types. As I had a mix of loan types, and no
    process to apply was described for me, I did not pursue PSLF. I was
    disappointed, as I was a public servant, had current loans held by
    Navient which totaled $65,000 on 6/22/2007, and had payments of $360.64
    remaining through 2037 which would be until my 81st birthday!
        I additionally knew that the pervasive teacher shortages in my area
    could be alleviated with a robust PSLF strategy for students. My
    students often held student debt and were also interested in careers in
    teaching.
        In 2020, I became aware of renewed outreach by student loan
    advocacy groups about PSLF and assurances that PSLF's would be
    reconsidered under the new Federal administration. I also turned 65 in
    2021 and chose to retire, as I had been instructing my two elementary
    school-age grandchildren at home due to COVID pandemic school closures.
        I needed clarification about my status as a retiree and my PSLF
    eligibility, my denial of PSLF in 2017, and my eligible loan types. I
    worked with my union (American Federation of Teachers--AFT) and student
    loan service, MEETSUMMER, which assists borrowers in obtaining PSLF and
    otherwise navigating the student loan system (what I had hoped student
    loan servicers would do).
        I had loans serviced by Sallie Mae, NELNET and later NAVIENT from
    2008-2018. During this 10-year period I made 120 on-time payments for
    student loans and was never in default or forbearance. In 2020, I still
    owed $29,000 in student loans. I was informed that I needed to resubmit
    an Employment Certification Form from my employer and consolidate the
    existing NAVIENT loan into a Direct Student Loan (ICR) before October
    31, 2022, as a limited time waiver existed that would have allowed for
    broader loan-types, as well as prior loan payments to be considered.
        I was directed by Navient to MOHELA, the new servicer for PSLF. I
    downloaded the forms (loan consolidation and PSLF certification) from
    the MOHELA website and followed the instructions on the MOHELA website
    which only allowed for paper copies to be submitted by mail or fax. I
    then met with MEETSUMMER staff to check the forms and they then faxed
    in my forms to MOHELA. I have proof that both of my forms were faxed
    in, one on September 16th, 2022, the other on October 5, 2022.
        That was just the beginning of my saga. I needed clarification from
    MOHELA about a host of questions. What would the new interest rate be
    if PSLF was not granted? Would my loan-types (specifically FFEL) be
    eligible? Would the loan term be extended past 2037 if I was not
    eligible? Would my status as a retiree impact my eligibility? Were my
    forms received and processed? Would I be granted the waiver allowing
    expanded counting of prior loan payments to private servicers, and the
    ability to retroactively count on-time payments for 10 years?
        MOHELA was unable to answer my questions because they were unable
    to provide any information about the status of either document I had
    submitted to them. After calling and emailing 30 times from November
    2022 to March 2023, I was unable to receive status updates or
    information. MOHELA staff were not able to provide information related
    to my loan consolidation form and I was told to wait 30, then 60, then
    90 days for processing. I was also told by MOHELA that due to the
    Federal loan forgiveness legislation and pending rulings, forms would
    not be addressed until after July 2023. I also called NAVIENT
    repeatedly and was told no consolidation had occurred and no further
    information could be provided. I was in a gray area--a lost land, where
    I belonged to no servicer and had no recourse. I just wanted to know if
    my faxes had been received before the October 31, 2022, deadline.
        Finally, in March 2023, my PSLF Employer Certification Form,
    submitted in September 2022, appeared on the MOHELA site as being
    processed. There was still no sign of the loan consolidation form being
    processed. I then was advised that I had to resubmit a loan
    consolidation form through a new organization (AIDVANTAGE), even though
    paper loan forms had been available to download on the MOHELA website.
    My new form was processed within 30 days, and Navient informed me that
    I was no longer a customer.
        In July 2023, I called MOHELA again, about the Direct Loan
    consolidation and the questions I still had about my eligibility for
    PSLF. I was told that there had been some recent changes to
    eligibility, but that II had to wait until 2024 to receive PSLF loan
    forgiveness information since past loan counts serviced by private
    servicers like NAVIENT had to be ``HAND COUNTED'' and then total
    payments tallied, and then sent to MOHELA, from the National Student
    Loan Data System records. As I had 120 qualifying payments with
    NAVIENT, this was a key step to PSLF approval. I imagined hundreds of
    staff working in a large warehouse filled with file boxes, hand
    counting my payments!
        In August 2023, still with no answers, I filed another complaint
    with the Consumer Financial Protection Bureau as well as with MOHELA. I
    received a letter from MOHELA within 15 days of filing the complaint,
    indicating that I had made only 3 qualifying payments to my current
    DIRECT STUDENT LOAN, and I had presumably 117 remaining. No mention of
    prior payments to NAVIENT was made, no mention of ``hand-counting''
    prior payments through the National Student Loan Data System and no
    mention of PSLF approval. I was further told that because I had
    consolidated my loan after the October 2022 limited waiver period, my
    past payments could not be counted. I guess my fax had been ``lost''.
        Call wait-times to MOHELA often exceeded 1-2 hours on hold, with
    decreasing call center hours and a host of new staff ``in training''
    without the ability to accelerate complicated cases or address
    questions that deviated from general topics. All employees were polite
    and tried to be helpful, but it seemed like they did not have the tools
    to escalate cases or questions. The MOHELA website provided the same
    general instructions but no real place for problem resolution once a
    customer is past the general information phase. There was no way to
    accelerate requests, receive clarification or complain. I filed a total
    of seven complaints to MOHELA, Consumer Financial Protection Bureau,
    and the Fed. Student Financial Aid Office out of frustration with the
    lack of progress of my PSLF. I had sent a consolidation form on-time,
    and I worked for a qualifying employer!
        When payments resumed in October 2023, after the COVID payment
    pause, I received a bill from MOHELA to pay $393.69 per month. I made
    that payment, despite having been in PSLF limbo for 12 months. It was a
    hard check to write.
        On November 26th, 2023, I received a letter from MOHELA indicating
    that my Direct Loan had been disbursed on 5/25/2023, and that I had 194
    PSLF eligible payments and of those, 160 payments were PSLF qualifying.
    That seemed like good news, but the estimated eligibility date for PSLF
    was blank. I tried to call MOHELA for clarification, but it was over
    the Thanksgiving holiday, and I waited.
        On November 29th, 2023, I received a letter from MOHELA, indicating
    that my loan was being placed in administrative forbearance. I was
    concerned, as interest typically accrued during forbearance, and I had
    not requested forbearance. Despite being on forbearance, I received
    bills for loan payments in both November and December. I paid both.
        Finally, on February 6, 2024, I received a form letter, thanking me
    for my public service and indicating that my principal and interest
    totaling $29,765.97 had been forgiven and that I had a credit balance
    for payments received in October, November and December which was
    returned later in February.
        I taped that letter up on my front door and kept it there for
    weeks. I remain grateful, but it was such a painful ordeal. On behalf
    of every eligible PSLF employee and especially every eligible teacher,
    I am here to advocate for change.
                        PREPARED STATEMENT OF PERSIS YU
       Deputy Executive Director and Managing Counsel, Student Borrower
                               Protection Center
                                 April 10, 2024

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                      PREPARED STATEMENT OF JASON DELISLE
     Nonresident Senior Fellow, Center on Education Data and Policy, Urban
                                   Institute
                                 April 10, 2024
    Introduction
        Chair Warren, Ranking Member Kennedy, and Members of the
    Subcommittee, thank you for the opportunity to testify about servicing
    in the Federal student loan program. The views expressed are my own and
    should not be attributed to the Urban Institute, its trustees, or its
    funders.
        I am a nonresident senior fellow at the Urban Institute's Center on
    Education Data and Policy, where I conduct research and analysis on
    higher education policy. Much of my work at the Urban Institute and
    throughout my career has focused on improving the design and operation
    of the Federal student loan program. I have published numerous analyses
    that examine the Income-Driven Repayment program and the Public Service
    Loan program to help policymakers understand the strengths and
    weaknesses of these benefits and how they can be improved. My testimony
    focuses on these two programs as they are at the center of many
    complaints about loan servicing. I also draw on research I conducted in
    2019 at the American Enterprise Institute that examined the loan
    servicing system in relation to borrowers' complaints filed with the
    Consumer Financial Protection Bureau. \1\
    ---------------------------------------------------------------------------
         \1\ Jason Delisle and Lexi West, ``Student Loan Servicers:
    Scammers or Scapegoats? An Analysis of the Consumer Financial
    Protection Bureau Complaint Database'', (Washington, DC: American
    Enterprise Institute, October 2019), https://www.aei.org/research-
    products/report/student-loan-servicers-scammers-or-scapegoats-an-
    analysis-of-the-consumer-financial-protection-bureau-complaint-
    database/.
    ---------------------------------------------------------------------------
        As you are aware, nearly all student debt is issued through the
    Federal Government's student loan program. However, the Government does
    not service the loans itself. Instead, it contracts with private
    companies (servicers) to handle most interactions with borrowers. \2\
    Borrowers with Federal student loans are unlikely to interact much with
    the U.S. Department of Education (the Department) when repaying their
    loans. Loan servicing companies collect payments, staff call centers,
    maintain websites, send account statements, and inform borrowers of
    repayment options.
    ---------------------------------------------------------------------------
         \2\ ``Who's My Student Loan Servicer''. Office of Federal Student
    Aid, U.S. Department of Education, https://studentaid.gov/manage-loans/
    repayment/servicers.
    ---------------------------------------------------------------------------
        Despite loan servicing companies' important role play in
    administering the program, the Department and Congress are also
    responsible for how the Federal student loan program operates. The
    Department plays a key role the program's administration by maintaining
    loan records, designing forms, and establishing contracts and
    guidelines for servicers, among many other functions. Congress also
    plays a role in how the program operates by defining terms and benefits
    for borrowers in statute.
        Although today's hearing is primarily focused on loan servicing,
    the role of Congress and the Department are also integral to a well-
    functioning student loan program. The policy and administrative
    decisions they make contribute to the program's success. Still, they
    both can also work at cross purposes with that success. Moreover, it is
    often difficult to disentangle the interaction of all three entities
    when identifying the source of administrative problems in the loan
    program. To automatically blame loan servicing companies for concerns
    of borrowers not being treated fairly may obscure other factors
    contributing to the program's challenges.
        In my testimony, I will discuss some of the other factors I believe
    contribute to borrowers' frustration and dissatisfaction with how the
    loan program operates and the quality of customer service they receive.
    I will put forth some principles for reform and related policy
    solutions that could improve how the loan program operates.
    Program Complexity Creates Servicing and Administrative Challenges
        The Federal loan program has become extremely complex in its
    required terms and the benefits it provides borrowers. The more
    complicated the student loan program becomes, the more challenges loan
    servicers and the Department will have in administering it, and there
    will be more confusion and frustration for borrowers. To be sure,
    complexity often stems from providing benefits and options to
    borrowers. This is an inherent tradeoff that should be carefully
    balanced.
        The most complicated part of the loan program is, by far, the
    Income-Driven Repayment (IDR) system. This program started as a single
    repayment option in the 1990s and now includes several options. Note
    that the IDR options are in addition to other repayment options such as
    consolidation, extended repayment, and graduated repayment.
        The latest IDR option, Saving on a Valuable Education or SAVE, was
    added by the Biden administration in 2023. \3\ Each of the IDR plans
    has different terms that are optimal for different groups of borrowers
    depending on their loan balances, interest rates, career paths, future
    income trajectories, and whether they borrowed for an undergraduate
    education or a graduate education. Although the creation of the SAVE
    plan simplifies this somewhat by generally providing the largest
    benefits, this is only true for undergraduate borrowers. \4\
    ---------------------------------------------------------------------------
         \3\ ``Improving Income Driven Repayment for the William D. Ford
    Federal Direct Loan Program and the Federal Family Education Loan
    (FFEL) Program: Final Regulations'', 88 FR 43820 (Jul. 10, 2023).
         \4\ Jason Delisle and Jason Cohn, ``The SAVE Plan for Student Loan
    Repayment: Which Fields and Colleges Benefit Most?'' (Washington, DC:
    Urban Institute, 2023), https://www.urban.org/research/publication/
    save-plan-student-loan-repayment.
    ---------------------------------------------------------------------------
        For example, a graduate borrower might benefit most from enrolling
    in the Pay As You Earn (PAYE) plan, because it provides loan
    forgiveness after 20 years of payments. But they must consider that the
    SAVE plan offers lower monthly payments than PAYE and forgives unpaid
    interest each month. The tradeoff is that loan forgiveness occurs after
    25 years of payments, which might negate SAVE's other benefits relative
    to PAYE. Further complicating matters, graduate borrowers who expect to
    use Public Service Loan Forgiveness program will always be better off
    in SAVE because of the lower monthly payments. Borrowers are likely to
    be frustrated and need support to understand these differences and
    choose a plan that is best for them. Loan servicers will be challenged
    to help them understand these differences as well. As a matter of
    policy, servicers do not counsel borrowers on which plan is best for
    their individual circumstances.
        The IDR system provides important benefits to borrowers, but it is
    always going to add complexity to the loan program. The SAVE plan goes
    even further in that direction. It is arguably the most complicated of
    the IDR options and will likely be prone to more confusion and
    servicing challenges. In other words, the system is set to become more
    complicated with the creation of SAVE.
        For example, unlike other IDR plans, borrowers' payments in SAVE
    are calculated based on a prorated share of their debts for graduate
    versus undergraduate studies. Debts from undergraduate studies will be
    repaid at 5 percent of income (over an exemption) and debts for
    graduate school will be repaid at 10 percent of income. A borrower with
    an even split in their loan balances will, therefore, repay 7.5 percent
    of their income. Even though this policy serves a worthwhile purpose
    (it targets lower payments to undergraduate borrowers), it is
    complicated and requires the Department and servicers to process more
    information about borrowers' loans and make more calculations to arrive
    at a monthly payment, which increases the risk for errors and
    confusion.
        Loan forgiveness benefits in SAVE are also more complicated than
    past plans. Prior IDR plans provided one or two loan forgiveness terms:
    20 years of payments or, in some cases, 25 years for graduate
    borrowers. The SAVE plan sets loan forgiveness durations by the amount
    borrowed, but only for undergraduate borrowers. Under this approach,
    borrowers qualify for forgiveness after 10 years if they borrowed
    $12,000 or less, and the term increases by 1 year for each additional
    $1,000 borrowed, up to 20 years for undergraduates. Here again, the
    policy has a strong rationale--it links the loan forgiveness duration
    to amount borrowed--but it requires the Department and servicers to
    process more information about borrowers' loans and make more
    calculations to arrive at a forgiveness term, which increases the risk
    for errors and confusion among borrowers.
        The Public Service Loan Forgiveness (PSLF) program is another major
    source of frustration and confusion among borrowers and a significant
    source of accusations of loan servicing failures. I do not want to
    excuse poor student loan servicing or management by the Department, but
    it is important to acknowledge that the PSLF program poses an enormous
    administrative challenge for both entities because of its design. \5\
    Some loans are ineligible (but can be converted to become eligible),
    and only payments made in specific plans and statuses count toward the
    120 cumulative qualifying payments. Borrowers must make those payments
    while they are employed full-time in a qualifying job. They must submit
    paperwork certified by each employer they had during the repayment
    term, complete with accurate starting and ending dates that
    collectively span a decade or longer. Servicers and the Department must
    ensure borrowers have met all eligibility terms (loan type, repayment
    plan, repayment status, payment count, employment terms), and that they
    were met during the periods of qualifying employment before forgiving
    any loans. Given the extreme number of eligibility requirements and
    their complexity, it is not a coincidence that the program is the
    source of so many complaints. Note that both Congress and the Biden
    administration have taken steps to temporarily waive the original rules
    of PSLF to allow borrowers qualify more easily and address what some
    say were servicing and administrative failures.
    ---------------------------------------------------------------------------
         \5\ ``Public Service Loan Forgiveness'', U.S. Department of
    Education, Office of Federal Student Aid, accessed April 3, 2024,
    https://studentaid.gov/manage-loans/forgiveness-cancellation/public-
    service#qualify.
    ---------------------------------------------------------------------------
        Evidence shows that borrower frustration over programs such as IDR
    and PSLF is related to the terms of the programs, not simply loan
    servicing failures. In a 2019 study for the American Enterprise
    Institute, my coauthor Lexi West and I analyzed a random sample of
    1,200 out of 12,113 complaints borrowers had submitted to the Consumer
    Financial Protection Bureau's database and classified as complaints
    against Federal student loan servicers. \6\ We found that over a third
    of the complaints were about the terms and rules of the Federal loan
    program, which servicers do not set.
    ---------------------------------------------------------------------------
         \6\ Jason Delisle and Lexi West, ``Student Loan Servicers:
    Scammers or Scapegoats?'' (2019); At the time we downloaded complaints
    for analysis, there were 12,113 complaints with narratives, which is
    the universe of complaints from which we drew our sample, and roughly
    9,000 more complaints without narratives. In complaints without
    narratives, the borrower selected complaint topics from the CFPB's
    menus, but did not further explain the issue with a written
    description. Because we rely on the narratives for our analysis, we
    sampled only from the complaints with narratives.
    ---------------------------------------------------------------------------
    Loan Program Instability and Uncertainty Create Administrative
            Challenges
        In addition to complexity, the Federal student loan program has
    been subject to enormous uncertainty and instability in recent years,
    largely owing to the Biden administration's changes the in its rules
    and regulations. Some of these changes were direct responses to pausing
    loan payments in the early days of the COVID-19 pandemic. Still others
    reflect a large-scale reform agenda the Biden administration has sought
    to execute outside the legislative process. These changes, which I will
    discuss below, will likely to contribute to servicing and
    administrative challenges along with borrower frustration. All will
    require servicers and the Department to develop new processes, rules,
    guidance, forms, and communications on short timelines, creating
    instability and uncertainty in the loan program and setting the stage
    for errors and delays.
        The most prominent of these efforts include the Administration's
    student loan forgiveness program developed under the HEROES Act of
    2003, which was struck down by the Supreme Court in 2023. \7\ Even
    though the plan was immediately put on hold by court challenges in 2022
    and ultimately invalidated, the Department and servicers had to plan
    and prepare for the possibility that this new program would take
    effect. The Administration also sought to tie the end of the pandemic-
    era payment pause to the launch of the new loan forgiveness program,
    potentially creating a complicated administrative bottleneck in the
    program. Servicers and the Department would have to simultaneously
    manage two major new events (return to repayment and loan forgiveness).
    Congress ultimately intervened and mandated a restart to repayment in
    August of 2023. \8\
    ---------------------------------------------------------------------------
         \7\ Biden, President of the United States, et al., v. Nebraska, et
    al., 22-506 (2023), https://www.supremecourt.gov/opinions/22pdf/22-506-
    nmip.pdf.
         \8\ The Fiscal Responsibility Act of 2023, FRA; P.L. 118-5 (2023).
    ---------------------------------------------------------------------------
        The Administration is now developing a follow-on loan forgiveness
    program using a different statute that will again fall on the
    Department and servicers to implement. \9\ The details of that plan
    have yet to be made available, but are expected any month now. The
    rulemaking process has suggested so far that the plan will be more
    complicated than the initial plan struck down by the Supreme Court,
    increasing servicing and administrative challenges. \10\ The new plan
    may also be subject to court challenges that will create further
    uncertainty and instability in the loan program.
    ---------------------------------------------------------------------------
         \9\ ``Negotiated Rulemaking for Higher Education 2023-2024'', U.S.
    Department of Education, accessed March 12, 2024, https://www2.ed.gov/
    policy/highered/reg/hearulemaking/2023/index.html.
         \10\ U.S. Department of Education, ``Issue Paper: Student Loan
    Debt Relief, Session 1: October 10 and 11, 2023'', https://www2.ed.gov/
    policy/highered/reg/hearulemaking/2023/session-1--issue-paper-student-
    loan-reliefom-committee.pdf.
    ---------------------------------------------------------------------------
        The SAVE plan is also a significant new policy the Biden
    administration has implemented through the regulatory process. As
    discussed earlier, this new program entails new work for servicers and
    the Department due in part to the complicated benefits it will provide.
    In addition, the SAVE plan will allow many borrowers to become
    immediately eligible for loan forgiveness because it will grandfather
    in borrowers' past loan payment histories. \11\ Servicers and the
    Department must have the necessary administrative structure to execute
    those benefits.
    ---------------------------------------------------------------------------
         \11\ U.S. Department of Education, ``Biden-Harris Administration
    To Shorten Path to Debt Cancellation for Some SAVE Borrowers'', January
    11, 2024, https://www.ed.gov/news/press-releases/biden-harris-
    administration-shorten-path-debt-cancellation-some-save-borrowers.
    ---------------------------------------------------------------------------
        In addition to the SAVE plan, the Biden administration has also
    made significant changes to the terms of the IDR and PSLF programs from
    2021 through 2023, which it says are to assist borrowers in response to
    the pandemic. These policies retroactively made past payments in any
    loan repayment plan and specific time spent in deferment and
    forbearance eligible toward the loan forgiveness payment count required
    under IDR and PSLF. \12\ These policies effectively rewrote the rules
    for IDR and PSLF retroactively, as the statute States that only income-
    based payments and those under a 10-year plan count toward loan
    forgiveness (and payments made in the Direct Loan program for PSLF).
    ---------------------------------------------------------------------------
         \12\ U.S. Department of Education, ``Announces Actions To Fix
    Longstanding Failures in the Student Loan Programs'', April 19, 2022,
    https://www.ed.gov/news/press-releases/department-education-announces-
    actions-fix-longstanding-failures-student-loan-programs; U.S.
    Department of Education, ``Fact Sheet: Public Service Loan Forgiveness
    (PSLF) Program Overhaul'', October 6, 2021, https://www.ed.gov/news/
    press-releases/fact-sheet-public-service-loan-forgiveness-pslf-program-
    overhaul.
    ---------------------------------------------------------------------------
        These retroactive changes required a significant administrative
    undertaking for both servicers and the Department as they had to update
    and restate payment counts for borrowers and identify and notify
    borrowers newly eligible for loan forgiveness in IDR. In the case of
    PSLF, borrowers had to apply for the benefits by October 31, 2022,
    which created the conditions for a surge of applications that the
    Department and servicers both had to process.
        Amidst all of these changes, the Department and loan servicers must
    also manage the return to normal repayment for Federal student loan
    borrowers that began in late 2023. That process requires massive new
    outreach efforts to borrowers and other servicing tasks. Although the
    resumption of normal payments following the pandemic payment pause was
    always going to be challenging, the Department and servicers are having
    to conduct it while simultaneously implementing the Biden
    administration's many changes to the loan program.
    Policies To Improve Servicing and Program Administration
        Based on the issues outlined above, I highlight three areas where
    lawmakers could help promote a Federal loan program that is less prone
    to borrower confusion, frustration, and administrative challenges.
    Streamline and Simplify Loans, Terms, and Benefits
        A more streamlined loan program would likely be less prone to
    servicing and administrative challenges. The program can be simplified
    in many ways, but I list those I believe are directed most at improving
    loan servicing.

        Establish one income-driven repayment plan in statute and
            sunset all other income-driven repayment plans, as well as
            authority for the Secretary of Education to create new plans.

        Establish one default fixed-payment plan with a 20-year
            repayment term to replace all other nonincome-driven repayment
            plans, such as the standard, consolidation, extended, and
            graduated plans.

        Tie loan forgiveness benefits to total repayment time, not
            the number of payments or loan status during repayment; this
            will eliminate the need for complicated payment counts that
            have been a source of servicing problems and administrative
            complexity. \13\
    ---------------------------------------------------------------------------
         \13\ ``Education Needs To Take Steps To Ensure Eligible Loans
    Receive Income-Driven Repayment Forgiveness'', GAO-22-103720
    (Washington, DC: GAO, 2022), https://www.gao.gov/assets/d22103720.pdf.

        Eliminate forbearance and deferment benefits and use
    ---------------------------------------------------------------------------
            income-based repayment to allow borrowers to postpone payments.

        Eliminate interest and charge one large origination fee
            added to the initial loan balance; borrowers will know how much
            they owe immediately and their balance cannot grow, and there
            is no need to track and tally interest accrual.

        Use grants, direct payments, or tax benefits to subsidize
            public service employment instead of loan forgiveness benefits
            like Public Service Loan Forgiveness; income-driven repayment
            will allow these borrowers to make affordable loan payments.

        Reclaim congressional control over the major design, terms,
            and benefits in the loan program.

        As outlined above, much of the recent uncertainty and instability
    in the loan program stems from the Department of Education seeking to
    establish new programs and policies within the Federal loan program
    through its interpretation of the underlying statutes. Lawmakers could
    limit such activities and create a more stable loan program less prone
    to administrative friction by writing more specific language in the
    statute and not granting broad discretion to the Secretary of Education
    to set important program features. For example, the statute that the
    Administration used to create the SAVE plan leaves all major decisions
    about the plan's terms, such as the income-based repayment formula and
    the loan forgiveness term, up to the Secretary. \14\ The statute could
    instead specify the terms that Congress believes are appropriate,
    thereby avoiding successive Administrations inventing new plans with
    new terms whenever and however they see fit.
    ---------------------------------------------------------------------------
         \14\ 20 U.S.C. 1087e(d)(1)(D) and (e).
    ---------------------------------------------------------------------------
        Of course, it may be necessary in some cases to defer to the
    Secretary to refine broad terms of a statute and incorporate the
    agency's administrative expertise. To prevent the Department from
    taking extreme liberty with this authority, Congress could consider
    including provisions like one in the College Cost Reduction Act, H.R.
    2669 (118th Congress) that restricts the Secretary from promulgating
    regulations that will increase the subsidy cost of the Federal student
    loan program or that is ``economically significant.'' \15\ To ensure
    this language has its intended effect, it should also be more specific
    about what constitutes an ``economically significant'' rule and what
    baseline will be used to judge whether it would increase the subsidy
    cost of the loan program.
    ---------------------------------------------------------------------------
         \15\ College Cost Reduction Act, H.R. 6951, 118th Cong. (2024),
    https://www.congress.gov/bill/118th-congress/house-bill/6951/
    cosponsors?s=1&r=39.
    ---------------------------------------------------------------------------
    Consider Tax Withholding as an Alternative to Loan Collection and
            Servicing
        This reform would require major changes to the terms and benefits
    of the loan program, but collecting loan payments through the Federal
    income tax system has major advantages over the current repayment
    system. The main one: payments track income as it is earned, so there
    is no annual certification process that borrowers must complete.
    Another advantage is that it eliminates the need for loan servicing and
    servicers. It could also reduce delinquency and defaults.
        Under this approach, borrowers would elect additional withholding
    on their Internal Revenue Service Form W-4 or estimated quarterly tax
    filings, and then those amounts would be reconciled with the correct
    amount owed annually through the income tax filing process. In other
    publications, \16\ I have written about how such a system would work in
    detail.
    ---------------------------------------------------------------------------
         \16\ Jason Delisle, ``How To Make Student Debt Equitable and
    Affordable'', Manhattan Institute, July 23, 2019, https://
    manhattan.institute/article/how-to-make-student-debt-affordable-and-
    equitable.
    ---------------------------------------------------------------------------
        Note that the income-based repayment formula and forgiveness terms
    of the loan program would need to be simplified for this system to
    function well. Policymakers would also need to develop alternatives to
    charging monthly interest, such as a one-time origination fee, because
    the tax collection system is an annual process that operates with a
    timing lag. These issues are detailed in my other publications. \17\
    ---------------------------------------------------------------------------
         \17\ Jason Delisle, ``How To Make Student Debt Equitable and
    Affordable'', https://manhattan.institute/article/how-to-make-student-
    debt-affordable-and-equitable.
    ---------------------------------------------------------------------------
        Thank you, Chair Warren, Ranking Member Kennedy, and Members of the
    Subcommittee. This concludes my testimony, and I look forward to
    answering any questions you may have.
                                     ______

                      PREPARED STATEMENT OF SCOTT BUCHANAN
              Executive Director, Student Loan Servicing Alliance
                                 April 10, 2024
        Chair Warren, Ranking Member Kennedy, and distinguished Members of
    the Subcommittee: Thank you for the opportunity to testify today. The
    organization I lead, the Student Loan Servicing Alliance, is a
    nonprofit trade association that works to improve the servicing
    environment, practices, and educate elected officials and the media on
    the real issues and serious solutions. Servicers are committed to
    borrowers--they are our priority. Policy that puts them first is our
    goal. There are no simple answers to college costs and loan repayment--
    nothing is Black or White, but it requires sophisticated dialogue which
    I look forward to contributing to today.
    Who We Are
        The Student Loan Servicing Alliance (SLSA) is the nonprofit trade
    association that focuses exclusively on student loan servicing issues.
    Our membership is responsible for servicing over 95 percent of all
    Federal student loans and the vast majority of private loans, and our
    membership is a mix of companies, State agencies, nonprofits, and their
    service partners--including all federally contracted servicers and
    BPOs. Our servicer members and affiliate members provide the full range
    of student loan servicing operations, repayment support, customer
    service, payment processing, and claims processing for tens of millions
    of Federal and private loan borrowers across the country.
        SLSA's work focuses on advocating for Federal and State policy that
    improves loan servicing for all borrowers. We also serve as a forum for
    developing operational and technical best practices that enhance
    customer service and loan program administration. Further, we identify
    obstacles and opportunities within Federal and private loan programs
    that can benefit from our expertise and leadership, and we formulate
    and support solutions that can achieve simplification and
    standardization. We also work with other advocacy organizations to
    support the continuing enhancement and streamlining of student loan
    servicing laws, regulations, and practices to benefit our customers,
    borrowers, and improve the value of higher education. In short, SLSA is
    the leading voice on how student loan servicing can work best to
    deliver improved success for borrowers and families.
    The Role of Servicers
        While there has been much discussion about the critical issues
    facing the 43 million Federal student loan borrowers, there has been
    less discussion about the facts surrounding how the loan program works
    and what the responsibilities are of servicers in the lifecycle of a
    student loan. It is first critical to understand what a servicer does
    and what a servicer does not do. Servicers do not determine the amount
    a student borrows. Servicers do not set the interest rate on a student
    loan, do not determine what repayment options are available to a
    borrower, do not earn the interest or return off a student loan, do not
    fees or penalties, do not set payment application rules, and do not own
    the loans. Those are matters set by the lender, for whom the vast
    majority is the Federal Government--and therefore determined by Federal
    law and regulation--we do have an important role to play. Servicers
    communicate with borrowers to make available their repayment options.
    Servicers take and apply payments according to the terms of the loan.
    Servicers call and take calls from borrowers to explain the benefits to
    which a borrower is entitled. Servicers are highly regulated. And
    servicers take very seriously, as demonstrated by the actual metrics
    and facts of our performance, our role to help borrowers be as
    successful as possible in repaying their loans so the Federal student
    loan program can continue to serve future generations of students--the
    millions of future college students who the Higher Education Act was
    enacted to assist.
        While what we do is often misunderstood, so is the timing of when
    we step in to help borrowers. Our role begins after Congress has set
    interest rates and repayment plans, after a student has chosen a
    school, after the college has set the price and determined what other
    aid it will offer, after the borrower has decided how much they wish to
    borrow, after the loan has been originated and disbursed, and usually
    meaningfully begins after a student has graduated--or sometimes when
    they have left school for other reasons. That is when we begin regular
    communication with the borrower to help them access the options that
    are available so they can make the best choice amongst the repayment
    plans that Congress has provided. That communication is not a one-time
    event, and no single interaction in isolation characterizes the work
    that we do or the scope of what we share. Our efforts are a continuum
    of activity set by FSA, ranging from letters, emails, phone calls,
    websites, and sometimes chat or text, to meet borrowers where they are
    and most prefer to interact--and over time and multiple interactions--
    to make available the tools for they to effectively manage their
    student loan obligations. As a borrower's life situation changes, we
    also change our efforts with them to try and identify from what
    information they choose to share what options are available now, that
    may not have been available before. Has their job situation changed?
    Has their family expanded? Has their income level risen? And then, what
    do they want to accomplish? Every borrower has a different view of what
    steps will be in their best interest. Some want to pay down their
    student loans slower because they have other debt at higher interest
    rates. Some want to pay them down faster because they want to become
    debt free as soon as possible. Some want just a little time to get
    beyond a financial hurdle this month. Some want a long-term solution
    that aligns with the career path they think they will have, where maybe
    their income will rise meaningfully over time or maybe where they are
    taking a public service job where their income may be less than
    another. It is a fact that no single repayment plan or strategy is
    best--both financially and in desirability--for all borrowers. In this
    way, every borrower is different, and servicers are on the front lines
    of trying to help a borrower understand and navigate among those
    choices they must make. Below is the flow on responsibilities among
    parties involved in Federal student loans today.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Federal Loan Servicing Contractors
        Today there are four (4) primary student loan servicers that work
    for the Office of Federal Student Aid (FSA) and have borrower accounts:
    Aidvantage, Edfinancial, MOHELA, and Nelnet. The four companies today
    are directly contracted by FSA to perform the operational servicing and
    customer service functions for Federal student loans held by the
    Government. These contractors are paid a servicing fee that is based
    upon the number of borrowers, status of those accounts, and often per
    transaction fees for some specialty servicing functions. All loan
    revenue, including principal and interest payments, goes directly to
    the Government and drives the profitability or loss that the Government
    directly bears--and consequently flows to or from the taxpayer.
        In the future as FSA transitions over the coming months to a next
    generation servicing architecture (previously known as NextGen and now
    known as USDS) and an additional loan servicer, CRI, will be added into
    the group of current servicers with borrower accounts. This change will
    also mean that some functions (PSLF and TEACH Grant processing and
    tracking) will be moved to FSA and its BPO contractors. Further, IT
    infrastructure will be further embedded into the studentaid.gov
    environment with enhanced co-branding and an effort to create a single
    sign-on system in the future, especially important as borrowers will
    need to access their both their servicer's web portal and
    studentaid.gov--especially those making progress towards PSLF
    forgiveness.
        Statute, regulations, and FSA dictate the terms, conditions, and
    contractual requirements of servicers. The Government alone decides the
    way loans will be serviced, sets the standards, and then decides what
    level of service it wishes to pay for and how.
    Resumption of Repayment Challenges
        We have long warned that the return to repayment would be
    challenging for the student loan ecosystem, including FSA, servicers,
    and borrowers. Planning was not optimal for the resumption, with
    guidance either not being forthcoming or changing almost daily for the
    months leading up the final resumption date. In fact, prior to a
    previous potential resumption date--when we were merely days away with
    no clarity--I warned Secretary Cardona in a letter dated August 22,
    2022 of the issues that would occur because of the lack of proper
    planning and insufficient time to make staffing and operational changes
    required. Those issues were never addressed as meaningfully as hoped.
        FSA's own resumption playbook for servicers has been revised and
    edited more than 25 times, and was still being revised after resumption
    began. In the August 2023, the playbook was revised 10 times in that
    month alone--right when we are in the midst of trying to do the
    incredibly difficult IT system work, staffing preparation, and
    communications that should have been part of strategic planning that
    was not taking place. This constant shifting of expectations makes it
    virtually impossible to ensure that there are no errors, and often
    those errors still were due to lack of clarity or incorrect data or
    files provided by FSA. But we proactively identified errors and brought
    them to FSA and fixed them quickly--just exactly the way you would want
    any partner or contractor to do managing a massive project.
        Besides the actual return to repayment, servicers have been asked
    to implement or do development work on the following programs with zero
    to little advance notice, a complete lack of programmatic planning by
    FSA, and without being provided the financial resources to do so
    effectively or on a timeline that is reasonable:

        IDR one-time account adjustments

        PSLF waivers

        Fresh Start program

        SAVE plan rushed implementation

        Mass loan forgiveness proposals

        Loan transfers due to servicers exiting due to unworkable
            economics

        These massive changes and programmatic seismic shifts are on top of
    the previously existing web of complicating servicing requirements and
    workflows that Congress and the Department have iterated over the
    years. This layering and the vast array of options a servicer must
    manage intrinsically create an operational world where there are many
    potential operational fail points which must be carefully managed.
    Below you will see the complicated workflows that servicers must
    deliver every day for nearly 35 million borrowers who all have unique
    and specific situations:

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    SBPC and AFT Allegations
        The Student Borrower Protection Center and AFT have recently
    released a so-called ``report'' making accusations about MOHELA's
    servicing practices. MOHELA has provided a response to those
    accusations.
        But since we're likely holding this hearing partially because of
    this document produced by political organizations with false and
    misleading statements and phrases like ``dark history,'' ``company
    schemes,'' and ``uncovered documents,'' I will address it as well. This
    kind of imagery is straight out of a John Grisham novel--but it is
    equally as fictional.
        Let's meet this with facts:
        Call Deflection--Some suggest that a servicer developed and
    implemented a strategy called ``call deflection'' and suggest that they
    did so to harm borrowers. That is false. In fact, FSA mandated all
    servicers utilize this strategy and included it in their own playbook
    This approach encourages borrowers--who can--to self-service online
    rather than waiting to speak with a customer service representative.
    This was Government guidance.
        PSLF Backlog--Recent accusations suggesting servicers are
    responsible for a large backlog of Public Service Loan Forgiveness
    (PSLF) applications and that the backlog is intentional are also false.
    Today FSA makes all decisions about whether to approve or deny
    forgiveness, and so the vast majority of the backlog resides at a
    resource constrained FSA, which is also now struggling with their FAFSA
    breakdown. The assertion that a servicer wants to engage in delays or
    rejections for its financial benefit is grossly unjust to the thousands
    of employees who work every day trying to help borrowers.
    The Actual Issues and Solutions
        So, what are the real and true issues we can work on together?
        First, fund quality service. For several years the Government has
    flat-funded servicing and customer support when borrowers most need it.
    Congress makes these choices through appropriations. The Government
    gets what it pays for, and when you don't make that choice--then
    borrowers pay the price.
        Second, change the law to fix what's broken. Most of the complaints
    about the functioning of the loan program are matters of statute. Most
    of the complaints about the functioning of the loan program are matters
    of statute. There is this false trope that 99 percent of borrowers have
    been denied for PSLF forgiveness because of some mistake or operational
    failure. That is false. Congress designed the program and intentionally
    drafted it to be narrowly focused and harder to obtain forgiveness.
    Servicers were tasked with implementing that law and did so. If
    Congress now wants to change that policy, it must change the law. Even
    the Administration recognized that fact, asserting it needed to use
    temporary emergency authority to bypass the law to provide accelerated
    and expanded forgiveness. But that will end, and Congress must act.
        Finally, we must all be accountable for our specific roles.
    Servicers must take accountability for issues that arise when we are
    given sufficient resources, direction, and time to make these programs
    work. But Congress and the Government must be accountable for providing
    those tools for success as the owner of the loans and manager of the
    loan program's terms and conditions.
        Since my time is limited, I will close by saying that I'm pleased
    to be here to have this conversation but hope it results in us working
    together to fix the problems that exist as opposed to blaming servicers
    for simply doing what the Department asked and pays them to do and what
    the law requires. Servicers care deeply about borrowers' experience--as
    I know you do--so let's focus on the root causes to do them justice. I
    look forward to your questions.
                                     ______

                      PREPARED STATEMENT OF QUINTON LUCAS
                          Mayor, Kansas City, Missouri
                                 April 10, 2024
        Chair Warren, Ranking Member Kennedy, and other Members of the
    Committee, I appreciate the opportunity to appear before the
    Subcommittee today. My name is Quinton Lucas and I am proud to
    represent the residents of Kansas City, Missouri, as their mayor.
        My home State of Missouri has been in the national spotlight as
    some politicians have worked on behalf of student loan companies to rob
    more than 40 million Americans--including over 80 thousand residents in
    my city alone \1\--of much-needed student loan debt relief.
    ---------------------------------------------------------------------------
         \1\ Ella Azoulay, ``New Analysis Shows What's at Stake for
    Borrowers Across the Country as President Biden's Political Opponents
    Attack Student Debt Relief'' (Feb. 17, 2023), https://
    protectborrowers.org/new-analysis-shows-whats-at-stake-for-borrowers-
    across-the-country-as-president-bidens-political-opponents-attack-
    student-debt-relief/.
    ---------------------------------------------------------------------------
        Rather than standing up for our constituents, the State's attorney
    general is doing the work of loan companies like MOHELA, the Missouri
    Higher Education Loan Authority, and arguing that student loan relief
    would harm our communities while exactly the opposite is true.
        I would like to take this opportunity to stand with the people of
    Kansas City and State unequivocally that our State Attorney General is
    wrong. And I want to thank you, Chair Warren, for your years of
    leadership on this issue.
        Missouri's attorney general and I both serve the people of
    Missouri--not student loan companies. We owe it to our people to hold
    student loan servicers accountable for fueling the student loan crisis
    in America and failing student loan borrowers and their families. While
    student loan borrowers bear the most direct burden, we all bear the
    cost of that failure because it keeps many of our youngest and
    brightest from being able to reach their potential as local leaders,
    entrepreneurs, parents, and citizens.
        Nearly 45 million borrowers have been crushed by nearly $1.7
    trillion in student loan debt. Across Missouri, more than 849,000
    borrowers owe more than $30 billion in Federal student loan debt. These
    burdens are carried disproportionately by people of color, with Black
    women and Latinas especially hard hit by student debt. That's debt that
    makes it hard to pay for everything else from necessities like health
    care to childcare. And forget about buying a first home. That doesn't
    just hurt them, it hurts us all.
        I graduated law school nearly 20 years ago, with tens of thousands
    of dollars of student debt, including college debt serviced by MOHELA,
    and was lucky enough to be able to pay it all off, but that was nothing
    compared to the repayment experiences I hear from borrowers today.
        I've heard from hundreds of borrowers in Kansas City who say they
    are experiencing crushing student loan debt, sometimes paying two or
    three times the cost of their original loan, while trying to afford the
    increasing cost of necessities. These are young people who are trying
    to create businesses, become homeowners, and build their careers, but
    their plans are halted while slowly chipping away at their student loan
    debt, which in many cases, will take them decades to overcome.
        Due to the skyrocketing cost of college, the promise of higher
    education as the pathway to the American dream has become a nightmare
    for millions of Americans, particularly working-class Black and Brown
    families, like many of the residents I represent back home.
        Beyond the unreasonable upfront costs of an education, millions of
    working families have been forced to navigate a rigged student loan
    repayment system. A system where student loan servicing companies like
    the Higher Education Loan Authority of the State of Missouri or MOHELA
    receives millions in taxpayer dollars only to fail and deceive
    borrowers at every turn--driving them further into debt and leaving
    them to fend for themselves.
        As you have said many times Chairwoman Warren. It is absolutely
    shameful. It is absolutely inexcusable. And it is absolutely long past
    time for accountability and justice.
        For too long, student loan servicers have been given a free pass as
    they stand in the way of relief and exacerbate the student debt crisis
    plaguing our local communities. Today's hearing is an opportunity to
    change that.
        Cities have been at the forefront of the student debt crisis.
        As Mayor, I have witnessed the toll of this crisis firsthand.
    Residents across Kansas City, from the historically Hispanic Westside,
    to the predominately Black East Side, have told me their personal
    stories. They have shared the ways that student debt is holding them
    back from achieving their personal and economic goals-hindering their
    ability to purchase a home, \2\ save for retirement, \3\ start a small
    business \4\ and contribute to their local economy, and even start or
    grow their family. Their struggle is our struggle because their
    inability to pursue opportunity denies us all the ability to share in
    their success.
    ---------------------------------------------------------------------------
         \2\ See Federal Reserve Bank, Consumer and Community Context (Jan.
    2019), https://www.federalreserve.gov/publications/files/consumer-
    community-context-201901.pdf.
         \3\ Rutledge, Geoffrey T. Sanzenbacher, and Francis M. Vitagliano.
    2016. ``How Does Student Debt Affect Early-Career Retirement Saving?''
    Working Paper 2016-9. Chestnut Hill, MA: Center for Retirement Research
    at Boston College, https://crr.bc.edu/how-does-student-debt-affect-
    early-career-retirement-saving/.
         \4\ Ambrose, Brent W. and Cordell, Larry and Ma, Shuwei, The
    Impact of Student Loan Debt on Small Business Formation (July 2015).
    FRB of Philadelphia Working Paper No. 15-26, Available at SSRN: https:/
    /ssrn.com/abstract=2633951.
    ---------------------------------------------------------------------------
        We have seen how the crushing weight of student debt is worsening
    workforce shortages afflicting State and local governments,
    particularly in rural areas, where it is already difficult to attract
    and retain workers in high-need areas such as teaching and healthcare.
    \5\ Shortages in these fields have reached crisis levels, with all 50
    States reporting a shortage of K-12 public school teachers in 2022. \6\
    In Kansas City, we are already facing stark shortages in our teaching
    \7\ and health care fields \8\ and the student debt crisis has only
    made these challenges worse.
    ---------------------------------------------------------------------------
         \5\ Jesse Rothstein and Cecilia Rouse, ``Constrained After
    College: Student Loans and Early Career Occupational Choices'', 95 J.
    Pub. Econ. 149 (2011).
         \6\ Emma Garcia, et al., ``Are We at a Crisis Point With the
    Public Teacher Workforce? Education Scholars Share Their
    Perspectives'', Brookings (Aug. 26, 2022), https://perma.cc/3KRF-URVM
    (citing Department of Education teacher shortage data).
         \7\ Jodi Fortino, ``Missouri's Teachers Are Among the Nation's
    Worst-Paid. Some Districts Are Getting Creative To Fix That'', KCUR
    (Dec. 29, 2022), https://www.kcur.org/news/2022-12-29/missouri-low-
    teacher-pay-retention-recruitment-missouri-legislature-session-2023.
         \8\ Michael Ollove, ``Health Worker Shortage Forces States To
    Scramble'', Pew (Mar. 25, 2022), https://perma.cc/ZK4U-372E.
    ---------------------------------------------------------------------------
        Further, the student loan debt crisis has exacerbated the mental
    health crisis and increased reliance on our local and State public
    health systems. Like other forms of financial insecurity, student loan
    debt has been found to negatively impact borrowers' mental and physical
    health \9\--increasing rates of anxiety and depression. Research has
    also shown that student debt impedes access to routine medical care and
    prevents borrowers from purchasing medication and even seeking non-
    emergency care. \10\
    ---------------------------------------------------------------------------
         \9\ See Thomas Richardson, et al., ``The Relationship Between
    Personal Unsecured Debt and Mental and Physical Health: A Systematic
    Review and Meta-Analysis'', 33 Clinical Psych. Rev. 1148 (2013).
         \10\ Catey Hill, ``Why Student Loans Are Bad for Your Health'',
    MarketWatch (Oct. 7, 2014), https://perma.cc/7YWZ-747D; Snapshot of
    Older Consumers and Student Loan Debt 13, Consumer Fin. Prot. Bureau
    (2017), https://perma.cc/C94YS7HL.
    ---------------------------------------------------------------------------
        In all instances, failing these individuals results in communal
    costs. The repercussions of the student debt crisis hinder the quality
    of life for our residents and ultimately fall to State and local
    governments, which provide care and services of last resort.
        When borrowers' debt burdens are eliminated or significantly
    reduced, they start businesses, secure housing, pursue careers in
    public service, and prioritize their health. These effects improve the
    quality of life in our communities, enhance revenues for our local and
    State economies, and reduce reliance on Government programs. We aren't
    doing them a favor, we are investing in the common good.
        President Biden's debt relief program would have benefited
    millions, spurred economic growth, and strengthened our communities.
        In August 2022, President Biden gave tens of millions of borrowers
    a glimmer of hope when he announced his original debt relief plan to
    cancel up to $20,000 in student loan debt. The historic proposal would
    have eliminated student debt balances for an estimated 20 million
    borrowers. \11\ By targeting relief to borrowers with the highest
    economic need, the plan would have made meaningful progress at reducing
    the racial wealth gap, with one in four Black borrowers seeing their
    debts entirely forgiven and half of all Latino borrowers becoming debt-
    free. \12\
    ---------------------------------------------------------------------------
         \11\ Press Release, The White House, ``Fact Sheet: President Biden
    Announces Student Loan Relief for Borrowers Who Need it Most'' (Aug.
    24, 2022), https://www.whitehouse.gov/briefing-room/statements-
    releases/2022/08/24/fact-sheet-president-biden-announces-student-loan-
    relief-for-borrowers-who-need-it-most/.
         \12\ Kierra Alfonseca, ``Biden's Loan Forgiveness Plan to Heavily
    Impact Black Borrowers'', ABC News, (Aug. 26, 2022), https://
    abcnews.go.com/US/bidens-loan-forgiveness-plan-heavily-impact-black-
    borrowers/story?id=88900684.
    ---------------------------------------------------------------------------
        Across the State of Missouri, more than 777,000 residents would
    have been eligible for relief. \13\ In Kansas City alone, more than
    $575 million in student debt would have been canceled for more than
    80,000 borrowers and 40,000 of these borrowers would have been
    completely debt free. \14\ Tens of thousands of our own residents would
    have seen an immediate decrease in their debt-to-income ratios, an
    improvement in their credit scores, and an enhancement of disposable
    income that they could have saved towards a downpayment on a home,
    their retirement, or back into our local economy.
    ---------------------------------------------------------------------------
         \13\ Press Release, ``The White House, Fact Sheet: The Biden-
    Harris Administration's Plan for Student Debt Relief Could Benefit Tens
    of Millions of Borrowers in All Fifty States (Sep. 20, 2022)'', https:/
    /www.whitehouse.gov/briefing-room/statements-releases/2022/09/20/fact-
    sheet-the-biden-harris-administrations-plan-for-student-debt-relief-
    could-benefit-tens-of-millions-of-borrowers-in-all-fifty-states/.
         \14\ Ella Azoulay, ``New Analysis Shows What's at Stake for
    Borrowers Across the Country as President Biden's Political Opponents
    Attack Student Debt Relief'' (Feb. 17, 2023), https://
    protectborrowers.org/new-analysis-shows-whats-at-stake-for-borrowers-
    across-the-country-as-president-bidens-political-opponents-attack-
    student-debt-relief/.
    ---------------------------------------------------------------------------
        This would have been a massive investment in working people with
    real benefits for everyone.
        Instead of celebrating this crucial relief for our economically
    burdened residents, our State attorney general in partnership with
    politicians across five other Republican-led States, decided to fight
    the plan in Federal court-placing the desire to score political points
    and the financial interests of MOHELA ahead of the economic prosperity
    of our own residents and communities. \15\
    ---------------------------------------------------------------------------
         \15\ Annelise Hanshaw, ``Missouri Company Plays Central Role in
    Downfall of Biden Loan Forgiveness'', Missouri Independent (Jul. 1,
    2023), https://www.kcur.org/news/2023-07-01/missouri-company-plays-
    central-role-in-downfall-of-biden-loan-forgiveness-program.
    ---------------------------------------------------------------------------
        In the suit, the Missouri Attorney General falsely argued that
    providing student loan debt relief would have harmed MOHELA's bottom
    line and, therefore would have financially harmed the State of
    Missouri. In partnership with the Public Rights Project, I joined 40
    local leaders across 24 States across the country in filing a brief in
    support of the program. \16\ Collectively, we represented more than 30
    million Americans, including almost 20 million people of color. The
    point we made to the Supreme Court was simple: When the debt burdens of
    our residents are lifted, we all benefit--as someone else once said--a
    rising tide lifts all boats.
    ---------------------------------------------------------------------------
         \16\ Brief of Amici Curiae Local Governments in Support of
    Petitioners, Biden v. Nebraska, 600 U.S. 477, 143 S. Ct. 2355 (2023),
    https://protectborrowers.org/wp-content/uploads/2023/01/Biden-v.-
    Nebraska-Local-Govt-Amicus-Brief-01.11.23-final.pdf.
    ---------------------------------------------------------------------------
        In the end, the far-right majority on the Supreme Court callously
    struck down President Biden's debt relief program, leaving millions of
    borrowers and their families waiting for much-needed relief and forcing
    them back into the jaws of a fundamentally broken student loan system.
        The Biden administration has continued to make progress to deliver
    on debt relief and hold servicers accountable, but more is desperately
    needed.
        Thankfully, the Biden administration has not abandoned our
    constituents. It has worked to make good on the President's promise to
    deliver debt relief using all legal tools at their disposal. Within
    hours of the Supreme Court's callous decision to strike down the debt
    relief program, President Biden announced that he would be pursuing a
    new plan utilizing his authority under the Higher Education Act. \17\
    Over the last several months, the U.S Department of Education has been
    making critical progress in finalizing this plan, which would grant the
    Secretary of Education broad authority to provide debt relief for
    specific categories of borrowers--including borrowers who went to low
    value schools, borrowers who have been stuck in repayment for more than
    two decades, borrowers drowning in runaway student loan interest, and
    those who may be eligible for debt relief but are not enrolled in a
    relevant program. The plan would also provide authority to support
    borrowers experiencing hardship due to their student loan debt. This
    new debt relief pathway has the potential to wipe away debt for
    millions of borrowers and finally make dreams of economic mobility a
    reality. \18\
    ---------------------------------------------------------------------------
         \17\ Press Release, The White House, Fact Sheet: ``President Biden
    Announces New Actions To Provide Debt Relief and Support for Student
    Loan Borrowers, (Jun 30, 2023)'', https://www.whitehouse.gov/briefing-
    room/statements-releases/2023/06/30/fact-sheet-president-biden-
    announces-new-actions-to-provide-debt-relief-and-support-for-student-
    loan-borrowers/.
         \18\ Aissa Canchola Banez, ``President Biden's Student Debt Relief
    `Plan B' Must Not Leave Millions of Borrowers in Hardship Behind'',
    (Jan. 18, 2023), https://protectborrowers.org/bidens-student-debt-
    relief-plan-b-must-not-leave-millions-in-hardship-behind/.
    ---------------------------------------------------------------------------
        In the meantime, the Biden administration has been working to fix
    the underlying student loan system and bring justice for borrowers
    cheated by their servicers. In April 2022, the U.S. Department of
    Education announced an effort to address historical student loan
    servicing failures in the Administration of the Federal student loan
    programs through a one-time student loan account adjustment to ensure
    that borrowers receive credit toward student loan forgiveness under the
    Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment
    (IDR) programs. \19\
    ---------------------------------------------------------------------------
         \19\ Press Release, U.S. Dep't of Educ., ``Department of Education
    Announces Actions To Fix Longstanding Failures in the Student Loan
    Programs (Apr. 19, 2022)'', https://www.ed.gov/news/press-releases/
    department-education-announces-actions-fix-longstanding-failures-
    student-loan-programs.
    ---------------------------------------------------------------------------
        As a result of the Biden administration's efforts, almost $144
    billion in student loan debt has been cancelled for nearly 4 million
    Americans. \20\ Many of these borrowers are teachers, nurses, and first
    responders who were cheated by their servicer out of relief that they
    were entitled to under Federal law through the PSLF program. Across the
    State of Missouri, nearly 20,000 public service workers have benefited
    from more than $1.2 billion in student loan debt relief under PSLF.
    \21\ These are 20,000 residents across our State whose lives will
    forever be changed by policies implemented by the Biden-Harris
    administration to simply ensure that our Government programs work.
    ---------------------------------------------------------------------------
         \20\ Press Release, U.S. Dep't of Educ., ``Biden-Harris
    Administration Approves Additional $5.8 Billion in Student Debt Relief
    for 78,000 Public Service Workers (Mar. 21, 2024)'', https://
    www.ed.gov/news/press-releases/biden-harris-administration-approves-
    additional-58-billion-student-debt-relief-78000-public-service-workers.
         \21\ Id.
    ---------------------------------------------------------------------------
        Prior to the Biden-Harris administration's fixes to the PSLF
    program, only about 7,000 borrowers had ever received forgiveness.
    Today, more than 100 times more borrowers are finally getting the
    public service loan forgiveness that they are due. Real Americans, with
    real families, freed to pursue the American dream.
        While this progress is unprecedented, and the relief enacted thus
    far is historic, more must be done. Unfortunately, tens of millions of
    borrowers remain vulnerable and subject to student loan servicing
    failures that will drive them further into the red. Thankfully, the
    Biden administration has made it clear that they will not simply look
    the other way as student loan servicers fail to do their job. In
    October 2023, as millions of borrowers were forced to navigate the
    rocky return to repayment process, the U.S. Department of Education
    (the Department) found that MOHELA failed to meet its basic obligations
    to borrowers and American taxpayers. According to the Department,
    MOHELA failed to send billing statements on time to 2.5 million
    borrowers--causing more than 800,000 borrowers to fall into
    delinquency. \22\ As a result, it withheld $7.2 million in payment to
    MOHELA and directed them to protect borrowers by placing them in a
    forbearance until the issues were resolved. Earlier this year, the
    Department announced a second round of actions to withhold payments
    from student loan servicers failing to do their job--this time for the
    companies Aidvantage, EdFinancial, and Nelnet. \23\
    ---------------------------------------------------------------------------
         \22\ Press Release, U.S. Dep't of Educ., ``U.S. Department of
    Education Announces Withholding of Payment to Student Loan Servicer as
    Part of Accountability Measures for Harmed Borrowers'', (Oct. 30,
    2023), https://www.ed.gov/news/press-releases/us-department-education-
    announces-withholding-payment-student-loan-servicer-part-
    accountability-measures-harmed-borrowers.
         \23\ Press Release, U.S. Dep't of Educ., ``Biden-Harris
    Administration Takes Additional Action To Hold Student Loan Servicers
    Accountable for Failing To Meet Contractual Obligations'', (Jan. 5,
    2024), https://www.ed.gov/news/press-releases/biden-harris-
    administration-takes-additional-action-hold-student-loan-servicers-
    accountable-failing-meet-contractual-obligations.
    ---------------------------------------------------------------------------
        Efforts to withhold payments from student loan servicing companies
    that are failing to meet their basic responsibilities to borrowers and
    the American taxpayers are part of a larger effort by the Biden-Harris
    administration to increase oversight and accountability into these
    companies and mitigate borrower harm. \24\
    ---------------------------------------------------------------------------
         \24\ Press Release, U.S. Dep't of Educ., ``Biden-Harris
    Administration Announces Framework for Student Loan Servicer
    Accountability To Protect Borrowers Nationwide'', (Nov. 9, 2024),
    https://www.ed.gov/news/press-releases/biden-harris-administration-
    announces-framework-student-loan-servicer-accountability-protect-
    borrowers-nationwide.
    ---------------------------------------------------------------------------
        In closing, Chairwoman Warren and Ranking Member Kennedy, industry
    representatives will try to present hollow talking points and spin to
    make excuses for MOHELA and other student loan servicers that have been
    failing to do right by borrowers and American taxpayers.
        However, it is quite simple that student loan servicers have one
    job--to support borrowers as they work to manage their student loan
    debt. For too long, they, like MOHELA, have failed to do their job, and
    as a result, borrowers are further in the red and we continue to miss
    out on the contributions they could be making to our communities.
    Student loan providers can and must be held accountable.
        Thank you.
           RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                           FROM JASON DELISLE

    Q.1. Your testimony on April 10, 2024, before the Economic
    Policy Subcommittee suggested that the Department of Education
    could do a better job at managing student loan servicers. What
    are some of the recent missteps committed by the Department of
    Education regarding its management of student loan servicers?

    A.1. The Federal loan program has become extremely complex in
    its required terms and the benefits it provides borrowers. The
    Biden administration has pursued many policy agendas that have
    greatly increased the complexity of the loan program. The more
    complicated the student loan program becomes, the more
    challenges loan servicers and the department will have in
    administering it, and there will be more confusion and
    frustration for borrowers. Added complexity requires the
    department and servicers to develop new processes and convey
    large amounts of information to borrowers. Biden administration
    policies that have added complexity and uncertainty include the
    following:

        A new income-driven repayment (IDR) program (SAVE)
            that includes a sliding-scale loan forgiveness benefit
            based on borrower debt levels and different payment
            rates based on a weighted average of a borrower's
            undergraduate and graduate debt. The Administration
            aimed to offer these benefits on a short timeline and,
            as a result, had to phase in the availability of
            different features.

        Waivers that alter the terms of Federal student
            loans as they are defined in statute, creating new
            rules, eligibility criteria, and deadlines, all of
            which must be implemented by servicers on short
            timelines.

        Multiple new loan forgiveness programs with
            complicated eligibility criteria that servicers must
            manage and communicate to borrowers in conjunction with
            the Department of Education.

    Q.2. In your view, why would a singular income-driven repayment
    program be more effective than the current income-drive
    repayment system where borrowers have multiple options?

    A.2. Under current policy, there are several IDR plans from
    which borrowers can choose, and borrowers are generally
    eligible for all the plans. They each provide slightly
    different benefits, and in some cases, certain plans may
    provide larger benefits depending on a borrower's situation.
    This creates the risk that a borrower may choose a suboptimal
    plan, and it requires servicers to convey complicated
    information to a borrower in helping them make a choice. A
    single IDR plan would address this issue and create a more
    easily understandable and simple Federal loan system. There
    would be less borrower confusion and frustration, and there
    would be less risk of loan servicing errors and challenges.

    Q.3. Please explain the intersection between inflationary
    fiscal policy and billions in student loan debt forgiveness.

    A.3. There is limited empirical evidence documenting the
    effects of mass student loan forgiveness on inflationary
    pressures in the economy. Nevertheless, when the Government
    forgives student loans, it creates new spending, and an
    increase in Government spending, especially when financed with
    budget deficits, has historically fed inflationary cycles. On
    the other hand, student loan payments are often a small share
    of household budgets and are low relative to the size of the
    student loan balances borrowers hold, partly because of the
    many flexible and generous repayment options the Government
    offers. Because payments are relatively low on several
    measures, forgiving the debt is unlikely to free up a
    consumer's discretionary spending to a large degree. That
    dynamic suggests that the increase in inflationary pressures
    that could stem from loan forgiveness are likely to be lower
    than what observers might assume.
        The JPMorgan Chase Institute estimated in 2019 that typical
    monthly student loan payments before the pandemic were $179,
    but that number excludes the many borrowers who qualify for $0
    payments under IDR or using deferments and forbearances
    (``Student Loan Payments: Evidence From 4 Million Families'',
    July 2019). The actual number is therefore lower. Moreover, the
    Biden administration has implemented an even more generous IDR
    plan since that study, lowering payments further. The Federal
    Reserve Bank of New York wrote in a blog post in 2023 that the
    resumption of student loan payments after the pandemic payment
    pause was likely to reduce consumer spending by just $56 per
    month (Liberty Street Economics: ``Borrower Expectations for
    the Return of Student Loan Repayment'', October 18, 2023). The
    authors then estimate that such a change would be consistent
    with a 0.1 percentage-point decrease in consumer expenditures.
    The authors also note that before the pandemic, payments were
    about three times higher than they are now. All these points
    suggest that inflationary effects of loan forgiveness could be
    far lower than what one might first assume.

    Q.4. What happens to student loan debt when it is forgiven?

    A.4. Federal student loans are recorded on the budget as an
    asset based on the present value of the expected future stream
    of payments that will be made on the loan. When the loans are
    forgiven, that expected value is reduced to $0, creating a
    budget cost that the Government must finance by either
    increasing tax revenue or reducing spending on other programs
    relative to the loans not being forgiven. For example, when the
    Federal Government issues a $100 Federal student loan, it
    expects, on average, that about $84 of the loan will be repaid,
    according to the Congressional Budget Office May 2023 baseline.
    The loan therefore carries a cost of $16. But when the loan is
    forgiven, that cost increases to $100 because the remaining $84
    will never be repaid as originally expected. The Federal budget
    will reflect that change, and it is a cost that must be
    financed by the revenue or a cut in spending elsewhere.

    Q.5. In your view, why is the current selection of student loan
    repayment programs so complicated? How should the Department
    simplify these student loan repayment programs?

    A.5. The current selection of repayment programs is complicated
    because Congress and multiple Administrations have sought to
    provide borrowers many options for many different circumstances
    when repaying their loans. They have done so generally to
    create flexibility for borrowers, allowing them to defer and
    reduce their payments. Policymakers have pursued these efforts
    without much consideration for a key trade-off: the benefits
    add complexity and increase the chances that borrowers become
    confused, and loan servicers struggle to administer the program
    efficiently and effectively. My written testimony outlines ways
    the program can be simplified in ways that generally benefit
    borrowers and that produce minimal costs to taxpayers. I'll
    reiterate those points here.

        Establish one IDR plan in statute, and sunset all
            other IDR plans, as well as authority for the secretary
            of education to create new plans.

        Establish one default fixed-payment plan with a 20-
            year repayment term to replace all other non-IDR plans,
            such as the standard, consolidation, extended, and
            graduated plans.

        Tie loan forgiveness benefits to total repayment
            time, not the number of payments or loan status during
            repayment; this change will eliminate the need for
            complicated payment counts that have been a source of
            servicing problems and administrative complexity.

        Eliminate forbearance and deferment benefits and
            use income-based repayment to allow borrowers to
            postpone payments.

        Eliminate interest and charge one large origination
            fee added to the initial loan balance; borrowers will
            know how much they owe immediately, and their balance
            cannot grow, and there is no need to track and tally
            interest accrual.

        Use grants, direct payments, or tax benefits to
            subsidize public service employment instead of loan
            forgiveness benefits like Public Service Loan
            Forgiveness; IDR will allow these borrowers to make
            affordable loan payments.

        Eliminate loan servicing and require borrowers to
            repay loans through Federal income tax withholding.
            Under this approach, borrowers would elect additional
            withholding on their Internal Revenue Service Form W-4
            or estimated quarterly tax filings, and then those
            amounts would be reconciled with the correct amount
            owed annually through the income tax filing process.
            Collecting loan payments through the Federal income tax
            system has major advantages over the current repayment
            system. The main one is that payments track income as
            it is earned, so borrowers would no longer need to
            complete an annual certification. Another advantage is
            that it eliminates the need for loan servicing and
            servicers. It could also reduce delinquency and
            defaults.
                                    ------

           RESPONSES TO WRITTEN QUESTIONS OF SENATOR KENNEDY
                          FROM SCOTT BUCHANAN

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