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Financial Planning > College Planning > Student Loan Debt

Sen. Warren to Federal Student Aid Chief: What's Your Plan?

By Bernice Napach

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Months after the Inspector General of the Department of Education issued a scathing report on the agency’s oversight of loan servicers, Sen. Elizabeth Warren, D-Massachusetts, is demanding information from the head of the agency’s Federal Student Aid (FSA) office about his plans to hold student loan servicers and contractors accountable.

“Based on the massive size of this loan portfolio, FSA is essentially the country’s fifth largest bank and the world’s largest student loan bank,” wrote Warren in her letter to General Mark Brown, the fourth person to lead the FSA during the Trump Administration. “Yet, FSA has repeatedly failed borrowers and taxpayers. You have a great deal of work to do to improve FSA.”

(Related: Warren Proposes Scrapping Student Debt for Millions)

The office oversees about $1.5 trillion in federal student loan debt held by 44 million Americans. over 40 million. Roughly 8.6 million of those borrowers are in default on $150 billion in federal student loans.

According to the inspector general’s report, the FSA failed to track all instances of noncompliance with federal law and rarely held servicers accountable and failed to collect all the information necessary to ensure that servicers were acting in compliance with federal law.

Among the particulars: servicers often failed to inform borrowers of available repayment options, including income-driven repayment plans and often miscalculated repayment amounts so that they were not affordable for borrowers.

A GAO in September 2018 found failures in FSA oversight and support of the Public Service Loan Forgiveness Program (PSLF) and of PHEAA, the company responsible for oversight of the program.

In her 23-page letter to Brown, Warren lists many questions she wants Brown to answer about these reported failures of FSA as well as its oversight of for-profit colleges whose students receive federal loans. Several of those for-profit colleges such as Corinthian Colleges, have closed leaving students with heavy debt loads yet FSA has failed to forgive the debt of many of those students under its own Borrower Defense program.

Warren notes that at least 158,000 borrower defense applications are pending before the DOE and 8.6 million pending cases for borrower defense. The Massachusetts senator who’s running for the Democratic presidential nomination and has developed her own plan to provide relief for student loan borrowers, wants Brown to provide answers to all of her questions by no later than May 28.

“We have to get this right,” writes Warren. “The financial lives of millions of Americans depend on it.”

— Related on ThinkAdvisor:

Bernice Napach

@Think_Napach

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