NASFAA Report Examines Student Loan System Shortcomings to Protect Borrowers

Conversations on loan forgiveness fail to treat systemic flaws that lead to financial distress.

Contact: Allie Arcese
Managing Editor
(202) 785-6954
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WASHINGTON, D.C., MAY 16, 2022—All eyes are on the White House as officials contend with whether the president has the authority to unilaterally forgive any amount of student loan debt. While loan forgiveness would certainly provide welcome relief to struggling borrowers, it is an incomplete action without comprehensive policy solutions that will reform the broken student loan system that has led us to this point.

In a report released today, the National Association of Student Financial Aid Administrators (NASFAA) seeks to fill the gaps in the conversation by providing thoughtful, systemic, and targeted policy solutions to address underlying flaws in the student loan repayment and servicing systems that lead borrowers into financial hardship. In all, the report — which was funded by Arnold Ventures — outlines more than 30 recommendations to improve student loan servicing practices, rethink the terms and conditions of student loan repayment, increase institutional and program accountability, and reform student loan default.

“As the president and Congress debate and consider widespread debt forgiveness, we call attention to the noticeable absence and urgently needed policy reforms that will prevent borrowers from being in this same exact position in the future,” said NASFAA President and CEO Justin Draeger. “That’s why NASFAA convened subject matter experts across the higher education system to develop policy recommendations that address systemic shortcomings in our federal student loan system.”

Some of the 31 recommendations in the report include: 

  • Simplifying and making student loans more affordable by eliminating origination fees, lowering student loan interest rates, and consolidating existing repayment plans into three easy-to-understand plans. 
  • Eliminating negative amortization that creates a pernicious cycle where too many borrowers end up with larger loan balances years after they’ve entered repayment. 
  • Reforming the Public Service Loan Forgiveness Program to allow for rolling, ongoing forgiveness and ensuring borrowers benefit from current  flexibilities that waive bureaucratic program restrictions that may have prevented some borrowers from qualifying for forgiveness. 
  • Bringing all borrowers who are currently into default with a one-time reset, and developing safety nets for borrowers going forward that allows them to quickly rehabilitate their defaulted student loans at reduced cost and penalty.
  • Moving forward, automatically enrolling delinquent borrowers in income-driven repayment before they enter default, whenever possible. 
  • Requiring Federal Student Aid to implement a comprehensive set of servicer policies and procedures that allow transparency into student loan servicing, and require all servicers to use common branding and a single servicing system to interact with all borrowers. 
  • Revamping and updating the office of Federal Student Aid, as specified in statute, to focus more specifically on effectively managing the student loan portfolio. 
  • Creating incentives and funding for best-in-class servicing that simultaneously leverages competition between servicers while also promoting best practices that benefit the entire loan portfolio. 

As part of this work, NASFAA formed a coalition of 21 associations, organizations, and think tanks from the higher education policy, advocacy, and research community to assist in the development of these recommendations. 

While there is still more work to be done, these recommendations seek to transform the student loan system in a holistic way. NASFAA looks forward to working with lawmakers and the higher education community to further explore and strengthen these proposals as we work toward achieving an improved student loan system for all borrowers.

To request an interview with a NASFAA spokesperson on the loan servicing, repayment, and default recommendations please email [email protected].


The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents more than 32,000 financial aid professionals at approximately 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every 10 undergraduates in the U.S. Based in Washington, DC, NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit

Publication Date: 5/16/2022

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