Two Democratic lawmakers are asking the nation’s largest student loan servicers to improve their practices.
Reps. Emanuel Cleaver II of Missouri and Pramila Jayapal of Washington sent letters Monday to the CEOs of Navient, Nelnet, Great Lakes and FedLoan Servicing urging them to address consumer complaints about inadequate servicing, poor record-keeping and steering borrowers into costly repayment plans.
“We write to you with deep concern over the rising rate of student loan defaults and continuous claims of fraudulent practices in lending, servicing, and collecting,” the letter states.
The lawmakers noted that there is some $1.3 trillion in student loan debt outstanding, nearly all of it federally guaranteed student loans, according to the most recent data from the U.S. Department of Education. Some 4 .6 million of borrowers are severely behind on payments at the end of the third quarter — nearly double the number four years earlier.
“This is an issue that needs immediate remediation,” Cleaver said in a press release Monday. “There are too many people in the U.S. who are struggling and if we can lessen the burden with these student loans, we can help people breathe a little easier.”
The letter asks the servicing companies for information about four areas that the Consumer Financial Protection Bureau, 24 attorneys general and numerous consumer advocacy groups have cited as the most prevalent complaints: staffing and training, default and collections, forgiveness, and payment processing.
To the extent that servicers do not have programs in place to address complaints about these issues, Cleaver and Jayapal are requesting that the student loan companies retrain staff on repayment plans and other available plans; implement a pilot program to service high risk borrowers; commit to working with an independent third party to identify those who are delinquent and at high risk for default; and work with these borrowers to enroll them in a plan that ties repayment to their income levels; track metrics on high risk borrowers three to five years out from initiation of payments; and implement call center business hours that can service borrowers coast to coast.
No one at Navient, Nelnet, Great Lakes or FedLoan Servicing (a unit of the Pennsylvania Higher Education Assistance Authority) was not immediately available for comment.
Persis Yu, an attorney and the Director of National Consumer Law Center’s Student Loan Borrower Assistance Project, said in the same press release, "We applaud Representative Cleaver’s efforts to ensure that servicers working for the federal taxpayer are operating in the best interest of student loan borrowers."
Yu noted that the CFPB, under former director Richard Cordray, sued Navient for allegedly systematic failures in processing loan payments and failing to enroll borrowers in less expensive repayment plans.
The letter comes as House Republicans are working on legislation that would eliminate some of the Education Department’s most generous repayment programs. The Education Department has also been meeting with major finance and tech companies to get ideas to improve how it manages the program and services loans.
Cleaver held a town hall on the student loan debt in his district in Kansas City, Mo., last summer, according to the press release. He also called on the U.S. Government Accountability Office to investigate the Department of Education’s student loan services and industry practices.