WASHINGTON – Today, U.S. Senator Bill Cassidy, M.D. (R-LA), ranking member of the Senate Health, Education, Labor and Pensions (HELP) Committee, and U.S. Representative Virginia Foxx (R-NC), chairwoman of the House Education and the Workforce Committee, requested a Government Accountability Office (GAO) review of the Department of Education’s (ED) work to return student loan borrowers to repayment.
With student loan payments resuming next month, the Biden administration’s continued failure to provide clear and proper guidance to borrowers demonstrates the low priority it places on ensuring a smooth transition back to repayment. This comes as President Biden announced previously that borrowers will not be penalized or considered delinquent if they miss payments for up to a year, a clear violation of the debt ceiling agreement signed into law earlier this summer. Borrowers who choose not to pay will still be charged interest on their unpaid loans and may be unaware that interest is accruing.
On June 27th, Cassidy and Foxx requested an in-person briefing—to be conducted no later than July 20th, 2023—on the Biden administration’s plan to return millions of borrowers to repayment. After repeated stonewalling, ED finally briefed the lawmakers on borrowers’ return to repayment yesterday afternoon. There remain more questions than answers.
“Given the multiple prior deadlines for the return to repayment and the repeated extensions of the payment pause, it is highly likely there will be confusion among borrowers and many who may not take this repayment deadline seriously,” wrote the lawmakers. “The administration’s repeated mixed messages raise questions about the incentives borrowers have to avoid repayment of their loans and about the costs of these actions to taxpayers.”
Read the full letter here or below.
Dear Mr. Dodaro:
The Fiscal Responsibility Act of 2023 mandated that the student loan payment pause end on August 30, 2023, and that borrowers return to repaying their federal student loans. Yet, we have received no indication that the Department of Education (Department) is prepared for this historic effort. Therefore, we are asking you to examine the administration’s readiness for and implementation of the return to repayment on federal student loans.
Student loan servicers will be responsible for helping millions of borrowers return to repayment, yet it is unclear whether the Department has provided servicers with the necessary guidance and instruction they need to assist borrowers. Historically, the Government Accountability Office (GAO) has found weaknesses in the Department’s efforts to provide appropriate guidance and instructions to servicers.
Additionally, it is unclear whether borrowers will begin repayments when billing statements resume. Given the multiple prior deadlines for the return to repayment and the repeated extensions of the payment pause, it is highly likely there will be confusion among borrowers and many who may not take this repayment deadline seriously. Moreover, the Biden administration has announced a 12-month “on-ramp” period that would allow borrowers to forego payments without the statutory and regulatory consequences for delinquency and default. Although monthly payments will be due and interest will accrue during this period, borrowers will not be reported to credit bureaus, be considered delinquent, or referred to collection agencies for late, missed, or partial payments during this period.
The administration’s repeated mixed messages raise questions about the incentives borrowers have to avoid repayment of their loans and about the costs of these actions to taxpayers. GAO previously found that the COVID-19 payment pause of March 13, 2020, through April 30, 2022, alone increased Direct Loan costs to the federal government by about $102 billion.
Given the importance of ensuring a smooth return to repayment, we respectfully request that GAO examine the following questions:
Thank you for considering this request. We would appreciate it if you could start this project as soon as possible given its urgent nature now that interest has started to accrue on September 1 and loan payments will resume in October.