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Student-loan borrowers are facing a host of challenges as they begin to enter repayment. The administration's top education official said Congress can help.
October 1 marked the official end of pandemic relief for federal student-loan borrowers. Bills are now starting to become due after an over three-year pause, and interest started to accrue again in September, meaning millions of borrowers are experiencing an unprecedented transition back into repayment.
It's a huge administrative task for the Education Department and federal student-loan companies — and borrowers have been suffering the consequences in the form of hours-long wait times to reach customer service, along with inaccurate billing statements.
Education Secretary Miguel Cardona told Insider in an interview that he's aware of the challenges this transition is bringing to both borrowers and servicers.
"Never in our country's history have we had 26 million people start repayment in one shot. We're doing that now. We're in communication daily with our servicers, we're working closely with them," Cardona said.
"We recognize there's bottlenecking in some places and people are waiting excessively long, and we recognize these issues and we're working to make sure that they improve while also trying to support our servicers who are, again, doing a task that has never been done before," he added.
One thing that Cardona said would help make the process smoother: more money. President Joe Biden's budget request to Congress for the upcoming fiscal year included a funding boost for Federal Student Aid to help administer the range of reforms the student-loan industry is undergoing, including the return to repayment.
Cardona said "we're going to continue to push and fight for dollars to make sure that we have adequate resources to provide our our students, our borrowers, with the support that they need out of our Federal Student Aid office."
However, with Republicans holding a majority in the House, it's unlikely they will fulfill Biden's budget request. In fact, some of them recently proposed funding cuts for Federal Student Aid, and Under Secretary of Education James Kvaal previously told Insider he's concerned with the impact on borrowers from the lack of funding.
"The servicers do not have the funding that we would like to give them to better serve borrowers," Kvaal said.
However, some lawmakers don't think funding is the problem. Massachusetts Sen. Elizabeth Warren recently told Insider that servicers were paid during the pandemic even when they were not servicing millions of borrowers, which is why they should be fully prepared — and funded — to ensure a smooth transition into repayment.
"For them to come in now and cry poverty because it's hard to send out accurate bills to people who owe money does not prompt much sympathy," Warren said. "They signed contracts to administer the loan system accurately. Those are profitable contracts. But the servicers want even more money? I have no sympathy at all."
Still, some student-loan servicers continue to point to lack of resources when faced with customer service complaints. The servicer MOHELA, for example, told Warren and other lawmakers in August that it expects customer service delays to extend "well into 2024" because of insufficient funding for the industry.
"The immediate of return-to-repayment amid ever-increasing changes to the contract administration requirements and expanded training needs, combined with the lack of sufficient funding from FSA, means extensive servicing delays are a likely outcome," MOHELA said.
