Source: United States Senator for New Jersey Bob Menendez
WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Banking Committee that oversees student loan services, today called on the Department of Education to step up its oversight of student loan servicers and put borrowers first. At the hearing entitled “Examining Student Loan Servicers and their Impact on Workers,” Sen. Menendez highlighted well-established and long-standing problems with student loan servicers, particularly in regard to public service forgiveness loans.
“For years, I have watched and listened as my constituents and their families have suffered irreparable financial harm—at the hands of their student loan servicers.,” said Sen. Menendez. “Year-after-year, millions of borrowers are mistreated by their student loan servicers—who routinely provide inaccurate information, fail to disclose and explain fees that are charged to borrowers, and ultimately make it harder for borrowers to pay off their loans.”
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The Senator added, “What’s upsetting to me, is that this current mess was preventable. The Department of Education has known about these systemic issues for years. Its own Inspector General found in 2019, that despite regularly identifying instances of servicers’ noncompliance with the terms and conditions of the loans, the Education Department did not track or analyze these failures, nor did they hold servicers accountable for their poor performance – especially servicers of loans in the Public Service Loan Forgiveness program. That failure to act means added financial pain for the borrowers we’re talking about here today.”
Last month during another Banking hearing, the Senator urged Rohit Chopra, Director of the Consumer Financial Protection Bureau, to better monitor student loan servicers in order to prevent future abuses by these large companies. Over the years, student loan servicing companies have been systematically driving borrowers into expensive forbearances instead of the income-based repayment options that may serve them better in the long term.
Sen. Menendez has long advocated to cancel up to $50,000 in student loan debt. He has also called for the Administration to further extend the student loan pause—beyond August 31st—to fix longstanding issues with income based repayment (IBR), public service loan forgiveness program (PSLF), and issues regarding federal student loan servicers. These changes would open the door of opportunity for millions of student borrowers who have previously postponed buying their first home, opening a small business, or even starting a family because of student debt.
Earlier in 2020, Sen. Menendez authored the Student Loan Tax Relief Act, along with Senator Elizabeth Warren (D-Mass.), which exempts forgiven student loan debt from tax liability through 2026, and worked successfully to include it in the American Rescue Plan. As a result of those efforts, the average student loan borrower will now save $2,200 in taxes for every $10,000 of forgiven student loans. Last February, the Senator supported a bicameral resolution calling on the Biden Administration to use its authority to cancel up to $50,000 in student loan debt for federal borrowers. Sen. Menendez also has long-advocated for reform of the Public Service Loan Forgiveness (PSLF) program, which has faced scrutiny for mismanagement since its inception in 2007, with only 1 to 2 percent of PSLF applicants being approved each year prior to the Biden Administration proposing a sweeping overhaul of the PSLF Program.
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