There's no proof that student-loan companies are prepared to bring millions of borrowers back into repayment in under 2 weeks, 2 top Republican lawmakers say

  • Rep. Virginia Foxx and Sen. Bill Cassidy asked the GAO to investigate the student-loan payment resumption.

  • They said they're concerned loan servicers are not adequately prepared to facilitate repayment.

  • Interest started building on balances on September 1, and bills will start becoming due next month.

With millions of student-loan borrowers about to enter an unprecedented transition back into repayment, two leading Republican lawmakers are worried loan companies are not up to the task.

On Wednesday, Rep. Virginia Foxx and Sen. Bill Cassidy — top Republicans on the House and Senate education committees, respectively — sent a letter to the Government Accountability Office requesting that it look into the Education Department's efforts to prepare for repayment.

The student-loan payment pause officially ended on September 1 when interest began accruing again on federal borrowers' balances, and bills will start becoming due next month. The Education Department, along with student-loan companies, have never managed a transition back into repayment at this scale, and Foxx and Cassidy said in their letter that they're concerned the necessary preparation is not in place.

"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," they said. "Historically, the Government Accountability Office (GAO) has found weaknesses in the Department's efforts to provide appropriate guidance and instructions to servicers."

The lawmakers cited a 2018 GAO report that found the Education Department did not provide "key information" regarding the Public Service Loan Forgiveness program to servicers, which resulted in borrowers being improperly denied or kept in repayment for longer than necessary. Additionally, Cassidy and Foxx said that 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."

The lawmakers requested the GAO begin its investigation as soon as possible giving the looming payment restart date, and the asked the agency to examine, among other things, the nature of the guidance it has given to servicers surrounding repayment.

An Education Department spokesperson previously told Insider that the department remains in close contact with servicers to ensure information is effectively reaching borrowers regarding the upcoming changes to the loan industry. That includes the new SAVE income-driven repayment plan, intended to lower borrowers' monthly payments, along with a 12-month "on-ramp" period during which the department will not report missed payments to credit agencies.

Still, borrowers have already encountered a range of challenges before their bills are due. One student-loan company, Nelnet, has shut down its call center and website multiple times over the past two months due to technical difficulties, leaving borrowers who need help with repayment in limbo. Additionally, some borrowers have told Insider their monthly statement is inaccurate, but long hold times with customer service have made it difficult to get those issues resolved.

Under Secretary of Education James Kvaal previously told reporters that the department expects borrowers to flood the system next month, saying that more than 28 million people will once again owe payments.

"That's five times more than we typically have for repayment in an entire year," Kvaal said. "There's a lot of anxiety out there. And some borrowers have already begun making payments. In other cases, there will be borrowers who will take some time to work student loans back into their household budgets."

Read the original article on Business Insider