PORTLAND, Ore. (KOIN) – Oregon Attorney General Ellen Rosenblum is calling on the Biden administration to ensure student loan protections and warned of “serious and widespread” loan servicer issues as payments resume in October.
Rosenblum joined 19 attorneys general in a letter to the White House calling borrower protections, noting over 40 million borrowers will resume payments after a 3.5-year pause during the COVID-19 pandemic.
“Oregon student loan borrowers will face several challenges when their payments become due starting next week. We are asking the federal government to take action to avoid harm to these borrowers. The student loan system is not prepared to handle return to repayment—even with a functioning government,” said AG Rosenblum.
The attorneys general said even though the White House has taken steps to help borrowers – including the SAVE income-driven repayment plan and restoring borrowers credit with the Public Service Loan Forgiveness Program –- they warn the current borrowing landscape is “likely to create serious and widespread loan servicing problems, especially as the U.S. Department of Education itself appears to lack capacity to assist borrowers, oversee servicers, and enforce borrower protections during the return to repayment.”
The AGs argue that new loan servicers have little to no experience with high volumes of borrowers and do not appear to have enough staff to respond.
According to Rosenblum, some servicers are struggling to implement the SAVE plan. Earlier in September, loan servicer MOHELA had to re-issue payment notices to borrowers using the SAVE plan after their original notices listed a higher monthly payment than allowable under the program, Rosenblum said.
The attorneys general further that nearly 30 million borrowers were transferred to new servicers over the pandemic which “has created the potential for significant and widespread account and servicing errors, including billing problems, inaccurate account information, and placement in incorrect repayment plans.”
The attorneys general claim borrowers and state agencies are having difficulties getting timely responses to loan issues from loan servicers.
The coalition added that a looming government shutdown on Sept. 30 may also exacerbate borrower support.
The AGs are asking the Biden Administration to protect borrowers by mandating servicers to place borrowers affected by errors, or those unable to obtain affordable monthly payments, into forbearance and that the same forbearance be applied to groups of borrowers awaiting loan forgiveness.