Richard Cordray, the chief operating officer of Federal Student Aid (FSA), on Wednesday testified before the House Education and Labor Subcommittee on Higher Education and Workforce Investment, where members sought out answers concerning pressing updates on the office’s sprawling student loan servicing system.
The conversation covered issues surrounding federal financial aid and servicing, including the return to repayment for federal student loan borrowers, the recent announcements about changes to the Public Service Loan Forgiveness (PSLF) program, and the monitoring and oversight of predatory institutions.
Rep. Frederica Wilson (D-Fla.), chair of the subcommittee, largely praised efforts by the Department of Education (ED) to protect students and taxpayers from harm through the recent approval of targeted loan forgiveness, but expressed concern over the upcoming return to repayment.
“While the department's progress has been encouraging, FSA is facing a series of major hurdles that are on the horizon,” Wilson said. “The upcoming return to loan repayment presents a monumental task for FSA and student loan servicers. We must ensure that students receive the education and support they need to begin repaying.”
Cordray echoed the scope of that challenge, with federal student loan borrowers slated to resume student loan repayments after Jan. 31, 2022 and reiterated that the resumption serves as a defining moment for FSA.
“We know this will not be an easy transition for borrowers, our loan servicing partners, or any of the other stakeholders involved in the repayment process,” Cordray said in opening remarks. “We are working to execute a comprehensive plan that combines elements of borrower outreach; servicer hiring, training, and preparation; policy enhancements; and vendor and process oversight to ensure borrowers can effectively manage the process of returning to repayment.”
On the repayment transition, Cordray indicated that plans are still being circulated as to how FSA can best ensure borrowers are protected.
According to Cordray, while there isn't a specific policy in place to help ease the payment resumption on previously defaulted borrowers, FSA officials are considering what the repayment restart means for those borrowers who faced pre-pandemic financial burdens and how the department can aim to protect those vulnerable borrowers.
Throughout the hearing, Republican members of the committee largely took issue with FSA’s recent regulatory moves concerning PSLF and also accused FSA of exacerbating the student loan crisis.
“Mr. Cordray’s aggressive tactics have been the final nail in the coffin for several student loan servicing companies — causing them to exit the federal student loan program altogether,” committee Republicans said. “This will spell even more confusion for students navigating the already complicated system. It is clear that Mr. Cordray doesn’t see student loan servicing companies as partners, but as adversaries.”
Republicans also used their time to question Cordray on why a number of their document requests were left unanswered and demanded ED be more receptive to congressional oversight.
This was Cordray’s first congressional hearing since assuming his role at FSA. As ED continues to carry on with updates to its regulatory agenda, as well as changes to student loan servicing and reassigning numerous accounts, members on both sides of the aisle expressed an acute interest in how the agency addresses its student loan operations during this transitional period.
“The approaching restart of student loan requirements and the longer term shift to NextGen poses major challenges for FSA,” Wilson noted. “Student borrowers and servicers need clear guidance to ensure the transition back to repayment goes smoothly and NextGen fulfills the promise of a simpler more consumer friendly student loan system.”
Publication Date: 10/28/2021