WASHINGTON, D.C. – U.S. Sens. Sherrod Brown (D-OH) and Ron Wyden (D-OR) led a letter to 28 Federal Family Education Loan (FFEL) lender and guaranty agency Presidents and CEOs requesting that they take additional measures to support federal student loan borrowers during the COVID-19 pandemic. While the Coronavirus Aid, Relief, and Economic Security (CARES) Act and recent administrative action automatically provide forbearance, waive all interest, and halt collections on federally-held loans, approximately 8 million federal loan borrowers who have loans not directly held by the Department of Education (the Department) were left out of that relief.  Of the 6.9 million commercial FFEL borrowers who have at least one loan that does not qualify for full federal student loan relief, 1.5 million have a mix of FFEL loans that qualify for relief, and some that do not qualify.

Federal borrowers with loans not held by the Department, including those who have commercially-held FFEL loans, have the option to consolidate their loans into Direct Federal Loans and gain access to the automatic forbearance and other benefits included in the CARES Act. For some federal borrowers with loans not held by the Department, consolidation of some of their loans that do not currently qualify for CARES Act benefits would provide immediate relief.  This is particularly clear for borrowers in default on their commercially-held FFEL loans. Thus, the senators’ letter asks lenders and guaranty agencies to provide accurate information to borrowers about their options, including the costs and benefits of consolidation, and provide targeted communication and support for borrowers who could benefit from consolidating their loans.

“It is critical that all federal student loan borrowers have access to relief during this unprecedented period of economic turmoil. Millions of student loan borrowers continue to worry about when their payments may resume and must navigate unnecessary paperwork to receive only temporary extensions of their forbearance,” wrote the senators. 

“In short, there are a wide range of borrowers for whom loan consolidation is in their clear financial interest, and they deserve to receive this information from you, as their loan holder,” the senators continued.

In May, the House passed the HEROES Act that would extend the suspension of payment, interest and involuntary collection for federal student loans through September of 2021 and ensures federal student loan borrowers who were left out of the CARES Act (privately held FFEL and Perkins borrowers) get the same relief.

In August, 17 Senate Democrats joined a letter in support of federal student loan borrowers, specifically the millions of those whose ability to repay their loans has been negatively impacted by the novel coronavirus (COVID-19) pandemic and resulting economic crisis. Although the President recently issued an Executive Order temporarily extending forbearance for some borrowers and waiving interest through the end of the year, Congress must act to ensure this relief is reliably available until the public health emergency ends.

Along with Sens. Brown and Wyden, the letter was signed by U.S. Senators Patty Murray (D-WA), Chris Van Hollen (D-MD), Jack Reed (D-RI), Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Robert Casey, Jr. (D-PA), Cory Booker (D-NJ), Dick Durbin (D-IL), Mazie Hirono (D-HI), Sheldon Whitehouse (D-RI), Tammy Baldwin (D-WI), Kirsten Gillibrand (D-NY), Amy Klobuchar (D-MN), Tina Smith (D-MN), Tammy Duckworth (D-IL), Christopher Murphy (D-CT), Jeff Merkley (D-OR), and Jacky Rosen (D-NV).

The senators sent the letters to presidents and CEOs of the below organizations:

Access Group, American Student Assistance, Ascendium Education Solutions, Inc., Brazos Group,  Chancelight, College Loan Corporation, ECMC Group, EdSouth, Goal Structured Solutions, Illinois Student Assistance Commission, Kentucky Higher Education Student Loan Corporation, Louisiana Office of Student Financial Assistance, Michigan Finance Authority, Missouri Higher Education Loan Authority, National Education Loan Network (NELNET), Navient Credit Financial Corporation, New Jersey Higher Education Assistance Authority, New York State Higher Education Services, North Carolina State Education Assistance Authority, Northstar Guarantee, Oklahoma College Assistance Program,  Pennsylvania Higher Education Assistance Authority (PHEAA), Pittsburgh National Corporation (PNC), Sallie Mae Bank, Suntrust Bank, Utah Higher Education Assistance Authority, Utah State Board of Regents, Wells Fargo Bank NA.

A full copy of the letter can be found here and below:

 

September 15, 2020

Dear [Commercial FFEL Lender or Guaranty Agency President/CEO]:

We write to ask that you take additional measures to support federal student loan borrowers during the COVID-19 pandemic. Although the Coronavirus Aid, Relief, and Economic Security (CARES) Act and recent administrative action automatically provide forbearance, waive all interest, and halt collections on student loans held directly by the U.S. Department of Education (“Department”) until at least December 31, 2021, this relief has not yet been extended to all federal student loan borrowers. Approximately [eight] million borrowers with other types of loans backed by federal taxpayers but not held directly by the Department— including loans currently held by your organization—have not been extended the same benefits as those available on federally-held loans due to donut holes in the CARES Act and recent executive action.

It is critical that all federal student loan borrowers have access to relief during this unprecedented period of economic turmoil. Millions of student loan borrowers continue to worry about when their payments may resume and must navigate unnecessary paperwork to receive only temporary extensions of their forbearance. Borrowers with non-qualifying loans are also missing out on the waiver of interest that can help them avoid falling deeper into debt in the face of other financial difficulties. They may also fail to receive additional benefits such as progress toward forgiveness or loan rehabilitation or the pause on adverse credit reporting, both of which are mandated by the CARES Act. Temporary forbearance options that must be repeatedly requested by borrowers is far inferior to the automatic and extended relief. Consolidation is a simple solution to help non-covered borrowers get access to the same benefits available to those with non-federally-held loans.

A total of 6.9 million commercial Federal Family Education Loan (FFEL) borrowers have one or more loans that do not qualify for full federal student loan relief. Of these borrowers, 1.5 million have a mix of FFEL loans that qualify for relief, and some that do not qualify. All borrowers of non-covered federal student loans have the option of consolidating these loans into Federal Direct Loans (at www.studentaid.gov) to gain access to the full range of CARES Act benefits. As a loan holder, it is your duty to fully inform borrowers of their options, including consolidation.

Congress is still considering the path forward for additional COVID-19 response legislation.At this time, however, negotiations remain stalled due to partisan opposition to relief that meets the scale of this crisis. Among the proposals under consideration for the next package is bipartisan legislation known as the Student Loan Fairness Act, which would guarantee all federal student borrowers are equitably extended the same relief without the need for additional steps on their part. In any event, your organization does not need to wait for this legislation to receive the President’s signature in order to help borrowers today.

Any borrower with a commercially-held FFEL, school-held Perkins Loan, or loan issued under the Public Health Service Act can consolidate such loan into a Federal Direct Loan to obtain full CARES Act forbearance and related benefits. Borrowers can either consolidate these loans with other existing loans that qualify for such relief (if they have a mix of covered and non-covered loans) or choose to “consolidate” only their non-covered loans into covered loans—in essence, dividing these loans into two groups.

While borrowers may see a minor change to their listed interest rate after consolidation, this interest is currently being waived for covered loans. Additionally, while borrowers could lose some credit toward income-driven repayment (IDR) forgiveness if they consolidate a loan they had previously been paying under an IDR plan, they do not have to consolidate those loans together and therefore do not need to lose any such progress. Most borrowers are not enrolled in IDR plans, and your organization holds specific information on which borrowers would see no change in their IDR forgiveness timeline after consolidation because they have not been enrolled in an IDR plan. Borrowers need support and transparent information from you to help them understand their options, including the costs and benefits of consolidating.

The benefits of consolidation are particularly clear for the 1.2 million borrowers who are in default on a commercially-held FFEL loan. Unlike borrowers who are currently making payments on these loans, borrowers in default are continuously contacted by debt collectors and urged to take steps to pay the entire balance of these debts or take steps to get out of default and back into repayment—or else face wage garnishment and other extraordinary consequences. This set of limited options for borrowers reveals the urgent need to inform these borrowers about the benefits of consolidation. Should a loan holder advise a borrower to “rehabilitate” a defaulted loan rather than consolidate their loan out of default—or worse, fail to mention consolidation at all—the borrower would be steered toward a far worse financial deal both in the immediate term and over the life of a loan. Rehabilitation would lock a borrower into a loan that contains none of the benefits offered by CARES Act.

In short, there are a wide range of borrowers for whom loan consolidation is in their clear financial interest, and they deserve to receive this information from you, as their loan holder. We request that your organization immediately implement a phone, email, or mobile text campaign to all of your current borrowers to inform them of their options to consolidate their loans and obtain full CARES Act benefits. Such a campaign should have distinct information for borrowers who have solely non-covered loans in repayment, those who have a mix of covered and non-covered loans in repayment, those whose non-covered loans are currently being paid under an IDR plan and would lose credit towards IDR forgiveness if consolidated, and those whose loans are currently in default. This campaign should further provide information and instructions to borrowers who have covered loans on how they can exclude those loans from their application for consolidation, and an unbiased descriptions of the benefits and tradeoffs of consolidation.

Please confirm receipt of this communication and provide the expected date(s) of your outreach plan to Jan Singelmann with Senator Brown’s office at Jan_Singelmann@banking.senate.gov no later than [2 weeks from send]. Thank you for your attention to this important matter.

Sincerely, 

###