September 29, 2023

The Honorable Joseph R. Biden

The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

The Honorable Dr. Miguel Cardona

Secretary, U.S. Department of Education
400 Maryland Avenue SW
Washington, DC 20202

Dear President Biden and Secretary Cardona:

As the U.S. Department of Education (“Department”), borrowers, and servicers prepare for over
40 million federal student loan borrowers to return to repayment, we the undersigned Attorneys
General from Washington, Massachusetts, Arizona, California, Colorado, Connecticut,
Delaware, the District of Columbia, Hawaii, Illinois, Maryland, Michigan, Minnesota, Nevada,
New York, Oregon, Pennsylvania, Vermont, and Wisconsin, write to express serious concerns
about the challenges of this process and impending harm to federal loan borrowers in our states.
Our views are informed by our work as consumer protection officials in our respective states,
including enforcing consumer protection laws to curb unlawful practices by student loan
servicers and receiving consumer complaints from borrowers struggling to get timely and
accurate information from servicers.

We commend the historic work that your Administration has undertaken to transform our broken
federal student loan repayment system, including creating a new more affordable income-driven
repayment (IDR) plan, 1 providing loan cancellation for borrowers qualified under long-
established IDR criteria, 2 restoring borrowers’ credit toward Public Service Loan Forgiveness
(PSLF), making total and permanent disability discharge more accessible to disabled borrowers, 3

1
The White House, “New Student Loan Repayment Plan Benefits Borrowers Beyond Lower Monthly Payments”
(Aug. 22, 2023), https://www.whitehouse.gov/cea/written-materials/2023/08/22/new-student-loan-repayment-plan-
benefits-borrowers-beyond-lower-monthly-payments/ (last visited Sept. 14, 2023).
2
Press Release, U.S. Dep’t of Education, “Biden-Harris Administration Begins Discharges for 804,000 Borrowers
with $39 Billion in Automatic Loan Forgiveness as a Result of Fixes to Income-Driven Repayment Plans” (Aug. 14,
2023), https://www.ed.gov/news/press-releases/biden-harris-administration-begins-discharges-804000-borrowers-
39-billion-automatic-loan-forgiveness-result-fixes-income-driven-repayment-plans (last visited Sept. 14, 2023.)
3
Press Release, U.S. Dep’t of Education, “Over 323,000 Federal Student Loan Borrowers to Receive $5.8 Billion in
Automatic Total and Permanent Disability Discharges” (Aug. 19, 2021), https://www.ed.gov/news/press-
September 29, 2023
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and providing group discharges to defrauded students. 4 We recognize and appreciate your efforts
to support student loan borrowers, including building an “on-ramp” to repayment that will
protect borrowers who miss monthly payments in the first twelve months of repayment from
credit harm and default. 5

At the same time, we are concerned that circumstances are aligning to create serious and
widespread loan servicing problems. Unprecedented volumes of borrowers must now navigate a
complex system, many for the first time, with new servicers that have little to no experience with
such volumes and do not appear to be sufficiently staffed to respond to them. Compounding this,
the historic number of loans that transferred to new servicers during the COVID-19 payment
pause has created the potential for significant and widespread account errors. Simultaneously,
servicers appear to be struggling to operationalize some of the recent and necessary
improvements that the Department made to the federal loan repayment system.

In the face of these challenges, we appreciate the ongoing efforts of Department staff to prepare
for repayment in a way that will support borrowers’ success. However, at this critical moment
the Department itself appears to lack sufficient resources to provide needed assistance to
borrowers, meaningful oversight of servicers, and enforcement of borrower protections. 6 We are
particularly troubled by a looming government shutdown during the first week of repayment if
Congress fails to pass legislation to fund government operations by the time current funding
expires on September 30th.

While many of the problems associated with the return to repayment may not be avoidable at this
stage, we believe the Department can and should do more to mitigate harm to borrowers.
Specifically, we believe the Department should instruct servicers to liberally place affected
borrowers in non-interest-bearing administrative forbearances that count toward potential debt
forgiveness while account issues are researched and resolved.

Since the system-wide payment pause began in March 2020, several federal student loan
servicers have left the market, causing the transfer of over 30 million borrower accounts to

releases/over-323000-federal-student-loan-borrowers-receive-58-billion-automatic-total-and-permanent-disability-
discharges (last visited Sept. 14, 2023).
4
Press Release, U.S. Dep’t of Education, “Education Department approves $3.9 billion group discharge for 208,000
borrowers who attended ITT Technical Institute” (Aug. 16, 2022), https://www.ed.gov/news/press-
releases/education-department-approves-39-billion-group-discharge-208000-borrowers-who-attended-itt-technical-
institute (last visited Sept. 14, 2023).
5
The White House, “FACT SHEET: President Biden Announces New Actions to Provide Debt Relief and Support
for Student Loan Borrowers” (Jun. 30, 2023), https://www.whitehouse.gov/briefing-room/statements-
releases/2023/06/30/fact-sheet-president-biden-announces-new-actions-to-provide-debt-relief-and-support-for-
student-loan-borrowers/ (last visited Sept. 14, 2023).
6
S. Hughes, Federal Student Aid Office Has a Big To-Do List in 2023, But the Same Budget, Marketplace (Dec. 29,
2022), https://www.marketplace.org/2022/12/29/federal-student-aid-office-has-a-big-to-do-list-in-2023-but-the-
same-budget/ (last visited Sept. 14, 2023); K. Knott, Federal Student Aid Funding Woes Complicate Resuming
Student Loan Payments, INSIDE HIGHER ED (May 11, 2023),
https://www.insidehighered.com/news/government/student-aid-policy/2023/05/11/federal-student-aid-funding-
woes-complicate-resuming (last visited Sept. 14, 2023).
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another servicer. 7 We know from experience that servicing transfers create a high risk of
servicing errors. Before the COVID-19 pandemic, borrowers regularly reported issues with
servicer transfers, such as lost paperwork, incorrect records, and delays in communication.

Last year, the Consumer Financial Protection Bureau (CFPB) issued a report detailing its
supervisory activity of federal student loan servicing transfers. The CFPB’s findings included:
transferee servicers receiving insufficient information to accurately service loans; transferee and
transferor servicers reporting different numbers of total payments that count toward forgiveness
or discharge; servicer communications to hundreds of thousands of borrowers with inaccurate
information about the next payment due date; and a transferee servicer automatically placing
incoming accounts into a transfer-related forbearance instead of the CARES Act forbearance
more advantageous to the borrower. 8

Given this history, returning over 30 million accounts to repayment after a servicing transfer
presents risks of errors on an unprecedented scale.

In recent weeks, even before any payments have become due, borrowers have complained about
servicers billing inaccurate amounts. While some of these complaints may relate to issues that
stem from servicing transfers, others clearly relate to servicer struggles to operationalize the new
IDR plan, Saving on a Valuable Education (SAVE). In fact, earlier this month, MOHELA, the
servicer solely in charge of accounts on track for PSLF, had to re-issue repayment notices for
borrowers automatically transferred to the new SAVE repayment plan. This became necessary
because MOHELA’s original notice, issued in August 2023, indicated a higher monthly payment
than provided under the SAVE plan guidelines that took effect in July 2023. Other complaint
examples include:

• Payments that increased following automatic REPAYE to SAVE conversions. For

example, one borrower reported that their monthly payment increased from $293 to
$444. 9
• Payments that increased because servicers unilaterally and inexplicably removed
borrowers from their existing repayment plans (e.g., removed borrowers from SAVE,
PAYE, IBR, or extended repayment plans). For example, one borrower reported that their
monthly payment increased from $759 to $6,843 after seemingly being removed from an
extended repayment plan.
• Payments that increased well beyond the amounts borrowers were initially quoted when
applying for IDR through studentaid.gov.

7
A. Hegji, Federal Student Loans: Return to Repayment, CONGRESSIONAL RESEARCH SERVICE,
https://crsreports.congress.gov/product/pdf/IF/IF12472 (updated Sept. 1, 2023).
8
Consumer Financial Protection Bureau, Supervisory Highlights Student Loan Servicing Special Edition (Sept.
2022), https://files.consumerfinance.gov/f/documents/cfpb_student-loan-servicing-supervisory-highlights-special-
edition_report_2022-09.pdf, at 11 (last visited Sept. 14, 2023).
9
Prior to MOHELA’s reissuance of payment notices, the payment was calculated at $471.
September 29, 2023
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• Payment due dates in September 2023, when Department guidance states payments are to
resume beginning in October. 10
• Incorrect loan balances and interest rates.
Notably, many of these issues are affecting low-income borrowers who need to make use of IDR
plans and whom the Department explicitly sought to protect from the harmful effects of interest
accrual with the rollout of the new SAVE plan.

We are concerned that as borrowers encounter these and other types of problems, many will have
difficulty reaching their student loan servicers to resolve them. Complaints indicate that
borrowers are regularly encountering hold wait times over 60 minutes, and that some have been
quoted hold times exceeding 400 minutes. Borrowers with work and care responsibilities may be
unable to spend hours of their day on hold. Even our offices and state student loan
ombudspersons are having trouble obtaining timely responses from some servicers through
government complaint escalation channels. And when borrowers do reach servicers, many report
dissatisfying interactions, including representatives being unable to explain how payments were
calculated, unable to resolve problems, or providing inconsistent information.

During the payment pause, most borrowers were not in communication with their servicers and
may not know which company is now servicing their loans, exacerbating these challenges. This
environment creates opportunities for bad actors to prey on borrowers who have a hard time
contacting their servicer when hold wait times reach or exceed the 60-minute mark. Meanwhile,
the Department’s oversight is constrained by lack of adequate funding.

Although the Department has opened potential additional avenues toward loan forgiveness, their
scope and efficacy to resolve return to repayment problems are limited. For example, the
“limited PSLF waiver” ended on October 31, 2022. The upcoming IDR payment count
adjustment is a “one-time” event that will only count payments through the end of the year, and
does not count short-term forbearances toward forgiveness. 11 The new IDR regulations only
count very specific administrative forbearance periods toward forgiveness, and the associated
IDR loan forgiveness “buyback” option, once it becomes available on July 1, 2024, will not be
available retroactively. 12 Further, the Department has stated that the buyback option for PSLF
borrowers will not apply to pre-consolidation periods, even though many PSLF borrowers need
to consolidate before the end of the year to maximize the payment count adjustment. 13 Moreover,

10
U.S. Dep’t of Education, Federal Student Aid, “Prepare for Student Loan Payments to Restart,”
https://studentaid.gov/manage-loans/repayment/prepare-payments-restart; see also U.S. Dep’t of Education, Federal
Student Aid, “COVID-19 Emergency Relief and Federal Student Aid,” https://studentaid.gov/announcements-
events/covid-19 (last visited Sept. 20, 2023).
11
U.S. Dep’t of Education, Federal Student Aid, “Payment Count Adjustments Toward Income-Driven Repayment
and Public Service Loan Forgiveness Programs,” https://studentaid.gov/announcements-events/idr-account-
adjustment (last visited Sept. 20, 2023).
12
34 C.F.R. § 685.209(k)(6)(i); Improving Income Driven Repayment for the William D. Ford Federal Direct Loan
Program and the Federal Family Education Loan (FFEL) Program, 88 Fed. Reg. 43820, 43854 (July 10, 2023).
13
U.S. Dep’t of Education, Federal Student Aid, “Public Service Loan Forgiveness FAQ,”
https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service/questions (last visited Sept. 20, 2023).
September 29, 2023
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none of these measures provide interest accrual relief for low-income borrowers—a problem that
the new SAVE plan was created to address.

Many of the undersigned states have taken legal action against servicers for consumer protection
violations such as failing to provide accurate information to borrowers about their repayment
options, failing to process IDR applications, or failing to accurately process borrower
payments. 14 In many cases, such practices were economically efficient for the servicers, even
while they harmed consumers. In the weeks ahead, as borrowers enter repayment, many will
need information and assistance. We are deeply concerned that the infrastructure to support
federal student loan borrowers is not sufficiently robust to adequately respond to this need.

We are also concerned that these challenges and failures will exacerbate racial inequity. Due to
the enduring racial wealth gap, student loan debt is disproportionately held by people of color.
On average, Black borrowers borrow $39,500, while white borrowers take out $29,900. 15 Prior
to the COVID-19 pandemic, borrowers of color defaulted at significantly higher rates than white
borrowers. 16 Given this, the issues discussed here will disproportionately harm borrowers of
color.

In light of these concerns, to mitigate harm to borrowers, we urge you to direct servicers that any
borrower or group of borrowers, who through no fault of their own, is unable to obtain accurate
information or access affordable monthly payments consistent with the Department’s guidelines,
must be returned to administrative forbearance in which interest accrual is paused, while the
forbearance period nonetheless counts toward potential debt discharge, and that such a
forbearance must remain in place until the issues are fully resolved. We believe that taking this
step is not only in the interest of borrowers, but also in the interest of the Department, as it will
help avoid a situation in which a new round of waivers or payment account adjustments becomes
necessary. We also ask that you instruct servicers to apply the same forbearance for cohorts or
groups of borrowers who have applied for forgiveness or discharge and are awaiting a
determination or are otherwise known to the Department to be potentially eligible.

We appreciate all of the efforts and resources the Administration has devoted to improving
outcomes for student loan borrowers. Our offices also appreciate all the work the Department has

14
Press Release, Washington State Attorney General’s Office, “AG Ferguson files suit against Sallie Mae offshoot
Navient Corp., announces Student Loan Bill of Rights legislation” (Jan. 18, 2017),
https://www.atg.wa.gov/news/news-releases/ag-ferguson-files-suit-against-sallie-mae-offshoot-navient-corp-
announces-student (last visited Sept. 14, 2023); Press Release, Massachusetts Attorney General’s Office, “AG
Healey Secures $2.4 Million, Significant Policy Reforms in Major Settlement with Student Loan Servicer” (Nov. 22,
2016), https://www.mass.gov/news/ag-healey-secures-24-million-significant-policy-reforms-in-major-settlement-
with-student-loan-servicer (last visited Sept. 28, 2023).
15
M. Wright, How Student Loan Forgiveness Can Help Close the Racial Wealth Gap and Advance Economic
Justice, LEGAL DEFENSE FUND (Apr. 17, 2023), https://www.naacpldf.org/student-loans-racial-wealth-gap/ (last
visited Sept. 15, 2023).
16
K. Welbeck, Communities of Color in Crisis: Examining Racial Disparities in Student Loan Debt and Borrower
Outcomes, STUDENT BORROWER PROTECTION CENTER (Jan. 8, 2020), https://protectborrowers.org/communities-of-
color-in-crisis-examining-racial-disparities-in-student-loan-debt-and-borrower-outcomes/ (last visited Sept. 15,
2023).
September 29, 2023
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done to prepare borrowers for the return to repayment, and to get messaging out to help
borrowers navigate this process, starting with logging into their studentaid.gov accounts. We
have and will continue to collaborate with the Department in sharing this important information
with the public. Our offices also stand ready to hold companies that cause financial harm to our
borrowers accountable for any unlawful conduct.

At this critical time, we urge you to take further action to meet the unprecedented challenges
created by the return to repayment and ensure that borrowers are not harmed by a system that
they do not control.

Sincerely,

BOB FERGUSON ANDREA JOY CAMPBELL

Washington State Attorney General Massachusetts Attorney General

KRIS MAYES ROB BONTA

Arizona Attorney General California Attorney General

WILLIAM TONG
PHILIP J. WEISER Connecticut Attorney General
Colorado Attorney General

KATHLEEN JENNINGS BRIAN SCHWALB

Delaware Attorney General District of Columbia Attorney General
September 29, 2023
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ANNE E. LOPEZ KWAME RAOUL

Hawaii Attorney General Illinois Attorney General

ANTHONY G. BROWN DANA NESSEL

Maryland Attorney General Michigan Attorney General

KEITH ELLISON AARON D. FORD

Minnesota Attorney General Nevada Attorney General

LETITIA A. JAMES ELLEN F. ROSENBLUM

New York Attorney General Oregon Attorney General

MICHELLE A. HENRY CHARITY CLARK

Pennsylvania Attorney General Vermont Attorney General

JOSH KAUL
Wisconsin Attorney General

cc:
James Kvaal, Under Secretary of Education, U.S. Department of Education
Richard Cordray, Chief Operating Officer, Federal Student Aid, U.S. Department of Education
Rohit Chopra, Director, Consumer Financial Protection Bureau