Warren, Senators Call for Transparency, Accountability from Department of Education in Transition to New Servicing Platform

July 29, 2024

Warren, Senators Call for Transparency, Accountability from Department of Education in Transition to New Servicing Platform

Warn of confusion as "white labeling" may prevent borrowers from holding servicers accountable

"Millions of borrowers across the country deserve transparency and accountability from student loan servicers."

Text of Letter (PDF)

Washington, D.C. - Today, U.S. Senators Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), Chris Van Hollen (D-Md.), and Bernie Sanders (I-Vt.), Chair of the Senate Committee on Health, Education, Labor, and Pensions (HELP), sent a letter to Secretary of Education Miguel Cardona, cautioning the Department of Education (ED) on Federal Student Aid's (FSA) transition to the Unified Servicing and Data Solution (USDS) system.

In an effort to modernize and improve student loan servicing, ED is currently in the process of transitioning towards a centralized FSA servicing platform for all federal student loans. However, the senators warn that the new servicing environment appears to lack transparency, making it more difficult for borrowers to hold their student loan servicers accountable.

"While we applaud the Biden Administration's efforts to modernize and improve student loan servicing, a preliminary review of publicly available information on this transition suggests that this new system lacks transparency," wrote the senators. "As a result, it will be difficult for borrowers and the federal government to hold servicers and contractors accountable, including the Business Process Operations (BPO) vendors that support account servicers."

As part of this transition, preliminary changes made this spring to specialized servicing, including the Public Service Loan Forgiveness (PSLF) program, suggest that borrowers are being routed to different BPO servicers to do different tasks, and these contractors' roles moving forward may be increasingly "behind the scenes." This breaking up of functions among servicers who are operating under the same label may create confusion, and it remains unclear how complaints would be routed.

The practice of labeling work performed by individuals companies as coming from a "single FSA brand" is known as "white labeling." As the Student Borrower Protection Center explains, "white labeling interferes with regulators and individual borrowers' ability to hold these companies accountable for servicing failures. When contracted companies perform low-quality services, because their actions are labeled as those of government agencies, their responsibility is obfuscated and blame is deflected to the agency." This makes it difficult to hold individual servicers accountable.

Moreover, the transition to USDS may pose barriers to identifying and reporting wrongdoing through channels such as borrower complaints to the Consumer Financial Protection Bureau (CFPB), a key way contractors are held accountable for the harm they have caused borrowers. In the past, ED has withheld payments to student loan servicers that have been shown by CFPB reports to be committing errors, such as failing to send timely billing statements to hundreds of thousands of borrowers.

"(C)o-branding or single-branding loan servicers with FSA and allowing BPO vendors to operate in silence without being identified as individual companies threatens to create confusion for borrowers and could lead to a lack of oversight and accountability for servicers' errors," the senators concluded. "FSA must incorporate strong transparency features that enable borrowers to identify the servicer responsible for their loan and hold that entity accountable."

The senators are requesting more information from ED on their short and long term plans to centralize federal student loan servicing under one FSA platform.

Senator Warren has led the fight to reform our higher education system, cancel student loan debt, and hold student loan servicers accountable:

• On May 23, 2024, Senators Warren and King led their colleagues in a letter to Education Secretary Miguel Cardona, urging them to provide guidance and communication to borrowers as the Public Service Loan Forgiveness program transfers from MOHELA to the Department of Education.
• On May 9, 2024, Senator Warren led a growing coalition of senators in urging the Department of Education to hold student loan servicer MOHELA accountable for its failures.
• On May 7, 2024, Senator Warren and 24 members of the U.S. Senate sent a letter to Senator Tammy Baldwin, Chair of the Appropriations Subcommittee on Labor, Health and Human Services, Education, and Related Agencies, and Senator Shelley Moore Capito, Ranking Member of the Subcommittee, encouraging them to provide $2.7 billion in funding to the Office of Federal Student Aid (FSA) in fiscal year (FY) 2025.
• On May 1, 2024, Senators Warren, Carper, Kaine, and Representative Don Davis (D-N.C.) called on the Department of Defense (DoD) to release data on the Postsecondary Education Complaint System (PECS), a centralized database to track complaints against schools who participate in the Tuition Assistance (TA) and My Career Advancement Account Scholarship (MyCAA) program.
• In April 2024, Senator Warren led eight of her colleagues in sending a letter to David L. Yowan, President and Chief Executive Officer of student loan servicer Navient, urging the servicer to cancel decades-old private student loans pushed onto borrowers attending fraudulent, for-profit colleges.
• In April 2024, Senators Warren, Blumenthal, Markey, and Van Hollen released a new report: Servicing Scandals: Student Loan Servicers' Failures During Return to Repayment, which reveals a decades-long pattern of student loan servicer incompetence and misconduct that has affected millions of borrowers nationwide.
• In April 2024, Senator Elizabeth Warren led a hearing on student loan servicer Higher Education Loan Authority of the State of Missouri (MOHELA) and its failures during borrowers' return to repayment, including MOHELA's mismanagement of the Public Service Loan Forgiveness program.
• In March 2024, Senators Elizabeth Warren and Ron Wyden (D-Ore.), Chair of the Senate Finance Committee, along with U.S. Representatives Ayanna Pressley (D-Mass.), Pramila Jayapal (D-Wash.), Raúl Grijalva (D-Ariz.), and John Larson (D-Conn.), led their colleagues in calling on the Social Security Administration (SSA), the U.S. Department of the Treasury (Treasury), and the U.S. Department of Education to end the practice of offsetting Social Security benefits to pay off defaulted student loans.
• In February 2024, Senator Warren, Majority Leader Chuck Schumer (D-N.Y.), and Senator Bernie Sanders (I-Vt.) released a statement calling for an investigation into student loan mismanagement by MOHELA.
• In January 2024, Senators Warren, Schumer, Sanders, Senator Raphael Warnock (D-Ga.), and Senator Alex Padilla (D-Calif.), along with Representative Ayanna Pressley, Assistant Democratic Leader Jim Clyburn (D-S.C.), Representative Frederica Wilson (D-Fla.), and Representative Ilhan Omar (D-Minn.), led their colleagues in calling on the Secretary of Education Miguel Cardona to host a fourth session of the student debt negotiated rulemaking to consider relief for borrowers experiencing financial hardship.
• In December 2023, U.S. Senators Warren, Richard Blumenthal, Ed Markey,, and Chris Van Hollen (D-Md.) sent follow-up letters to student loan servicers - MOHELA, EdFinancial, Nelnet, and Maximus - raising concerns about borrowers' problems with return to repayment, requesting information about the borrower experience, and pushing back on the servicers' claim that budget shortfalls limit their ability provide quality customer service to millions of borrowers.
• In December 2023, Senators Warren, Schumer, Sanders, Alex Padilla (D-CA), and Representatives Ayanna Pressley (D-Mass.), Ilhan Omar (D-Minn.), and Frederica Wilson (D-Fla.) sent a letter to U.S. Secretary of Education Miguel Cardona, urging him to leverage his existing and full authority under the Higher Education Act to provide expanded student debt relief to working and middle-class borrowers.
• In August 2023, Senator Warren, Congresswoman Ayanna Pressley, Senate Majority Leader Chuck Schumer (D-N.Y.), Senators Alex Padilla and Raphael Warnock (D-Ga.) and U.S. Representatives Ilhan Omar, Jim Clyburn, and Frederica Wilson led 79 other lawmakers in a letter to President Joe Biden, urging him to swiftly deliver on his promise to deliver student debt cancellation to working and middle class families by early 2024.
• In October 2022, Senator Warren and Representative Ayanna Pressley (D-Mass.) visited communities across Massachusetts to celebrate the Biden administration's student debt cancellation plan and help residents sign up for student loan relief.
• In October 2022, Senator Warren called on the Department of Education to hold for-profit colleges executives accountable for scamming students out of a quality education and loading them up with student debt.
• In March 2022, Senator Warren, along with Senate Democratic Whip Dick Durbin (D-Ill.), Senator Brown and Representatives Pramila Jayapal (D-Wash.) and Mark Takano (D-Calif.), urged Secretary of Education Miguel Cardona to swiftly discharge the loans of borrowers defrauded by predatory for-profit colleges and universities, including those operated by Corinthian College.
• In January 2022, Senator Warren, along with Senate Majority Leader Charles E. Schumer (D-N.Y.) and Representatives Jayapal, Pressley, Ilhan Omar (D-Minn.), and Katie Porter (D-Calif.) led more than 80 colleagues in a bicameral letter to the Department of Education calling for it to release the memo outlining the Biden administration's legal authority to cancel federal student loan debt and immediately cancel up to $50,000 of debt for Federal student loan borrowers.
• In October 2021, Senator Warren, along with Senator Markey and Representative Pressley, released a report that detailed the ongoing failures of the Public Service Loan Forgiveness program for public servants in Massachusetts.
• In April 2021, Senators Warren and Raphael Warnock (D-Ga.) led a group of colleagues in a letter to Education Secretary Miguel Cardona urging the Department of Education to take swift action to automatically remove all federally-held student loan borrowers from default.

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