Elizabeth Warren is part of a group warning that student-loan payments could get 'disastrous'
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- Sens. Elizabeth Warren, Ed Markey, and Tina Smith want to ensure borrowers are ready to restart paying student loans.
- They sent letters to the CEOs of student-loan servicers asking how they are preparing borrowers.
- Payments are set to resume in October as Democrats continue to call for $50,000 in debt cancellation.
- See more stories on Insider's business page.
Student-loan payments have been on pause for the duration of the pandemic, providing significant financial relief to borrowers. But the pause is set to lift in October, and some Democrats want to ensure borrowers are as prepared as possible.
On Monday, Sens. Elizabeth Warren of Massachusetts, Ed Markey of Massachusetts, and Tina Smith of Minnesota sent letters to the CEOs of all federal student-loan servicers, requesting information on the steps they are taking to transition borrowers back into repayment in October. According to a Pew survey, almost 40% of borrowers don't know when their payments will resume, and the press release noted that many loan servicers have laid off staff, hindering outreach to borrowers.
"If struggling borrowers are dropped back into repayment on their student loans with no adjustments or support, then they could find themselves in default or distress, facing disastrous long-term economic consequences that will echo across generations," the lawmakers wrote.
The Democrats requested information from seven student-loan servicers, and wrote in the letter that "student-loan servicers have an abysmal track record of helping borrowers navigate financial problems and complex repayment plans."
One of those servicers is Navient, which Warren has been working to hold accountable for decades. Insider reported in April that in 2006, when she was still a Harvard Law professor, Warren was interviewed on "60 Minutes" and cited student-loan abuses on the part of Sallie Mae, as Navient was known at the time.
In her first hearing as subcommittee chair on economic policy, on April 13, Warren invited Navient CEO John Remondi to testify, during which she told him that the government should "absolutely" fire Navient, and Navient should fire Remondi.
She told Insider at the time that the government has an "obligation" to hold the servicers accountable.
"Navient has a decades-long track record of cheating and misleading borrowers, servicemembers, and taxpayers," she said. "It's past time to fire them and other servicers that abuse student borrowers at taxpayer expense."
Education Secretary Miguel Cardona said during a Senate hearing last week that he is continuing to have conversations on extending the payment pause past September, but the Education Department declined to provide further details on those conversations.
Warren, Smith, and Markey are also calling for $50,000 in student-debt cancellation, but in the meantime, they want to ensure borrowers are equipped to restart payments in a few months.
"Millions of borrowers have had relief from their student loan payments and interest for more than a year during the COVID-19 pandemic - but they now risk being thrown into extraordinary financial hardship when their payments resume," the lawmakers wrote.
"We support cancelling $50,000 of debt for each borrower to relieve this burden on our economy, but in the interim, we are requesting information on how your company is preparing for this transition to repayment and the steps it is taking to ensure that it adequately supports borrowers."
asheffey@businessinsider.com (Ayelet Sheffey) Money Game http://www.businessinsider.com/moneygame
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