Biden’s vow to fix the student loan turmoil is about to face a major challenge as two companies are closed and millions of borrowers remain hanging. His education department “must fulfill that promise,” experts say.

• Two student loan companies were closed in December, affecting 10 million borrowers.

• Seth Flotman, executive. The director of the Student Borrower Protection Center said it offers opportunities for reform.

• Student loan companies have been scrutinizing misleading borrower accusations for decades.

• See other articles on Insider’s business page..

Two student loan companies-while student debt payments are suspended during a pandemic freeze Pennsylvania Higher Education Support Organization (PHEAA) and Granite condition management and resources -In July, announced that it would stop the loan service in December.

This means that when payments are unsuspended, 10 million borrowers will pay student debt to various companies-Granite State already Presentation Where the borrower will be transferred-but despite the administrative difficulties that may arise, experts have said this may be a good thing.

Seth Flotman, executive director of the Student Borrower Protection Center and former Student Loan Ombudsman of the Consumer Financial Protection Bureau (CFPB), is naturally concerned to insiders about the sheer number of borrowers who have to move to new students. Said there was. For lenders, that would be a step in the right direction, given what PHEAA did to mislead and harm the borrowers.

“It’s good that borrowers are no longer forced to do business with the company,” Flotman said. “At the heart of all student loan scandals that hurt borrowers, PHEAA was at the center of everything from teachers to military borrowers to civil servants.”

PHEAA did not immediately respond to Insider’s request for comment. Earlier, during the 12-year contract period, student loan programs became “more complex and difficult, and the cost of servicing those programs was dramatic, after announcing that FedLoan Servicing would be closed. Increased. “

The story continues

He said it would help the borrower move to a new loan company for the required period after the contract ends.

With the exception of PHEAA, the entire student loan industry is a borrower To borrow They cannot pay off.

Mr Flotman said reforms were delayed. “I think the days of people who accept half-hearted measures and unexpected corrections are over,” he said.

The administration “stacks the failures of one set on top of another”

Currently, there are nine student loan companies that manage the debt of 45 million American students, and in recent years the CFPB, along with members such as Massachusetts Senator Elizabeth Warren, have been found to have bad practices. We are calling for increased oversight of our company.

For example, the former insider report About the supervision of Warren, a student loan company Navient, formerly known as Sallie Mae, under President George W. Bush in 2006. She pointed out Sallie Mae’s abuse when she was a professor of Harvard law before becoming a senator. At the time, she and other Democrats announced the discovery that the Navient had tolerated the borrowers, especially misleading them about their options.

Flotman said he hopes Biden will respond to him. Campaign promise Reform of student loan programs such as Public Service Loan Licensing (PSLF) Program Reject 80% of applicants At least another 5 years without reform.

“Successive administrations only stack sets of failures on top of other sets,” Flotman said. “And the president promised that this was one of his top priorities.”

Student loan industry Established President Lyndon B. Johnson made it fair and accessible to everyone, but when Congress created Sally May in 1973, the industry turned into a profitable machine. $ 1.7 trillion Student debt crisis.

Frotman said he would send a message that “cheating and incompetence in the industry” is no longer tolerated, as two student loan companies have now terminated their contracts with the education sector.

Extension of final payment suspension brings “serious urgency” to fix the system

Secretary of Education Miguel Cardona Expansion Student loan payments and interest freezes until the end of January. Note that this is the “final extension” of the pause. Mr Flotman said reforms need to be made shortly before payments resume, given that the administration has revealed that there will be no additional extensions.

“What this does shows a serious sense of urgency that the department needs to fulfill its promise,” Flotman said. “You really need to fix the system before you can turn payment back on.”

Ministry of Education has already established $ 9.5 billion Targeted student debt cancellation has not yet met Biden’s campaign promise to forgive minority community debt and cancel $ 10,000 student debt per borrower. It can take years to actually make the changes, but it has begun the process of reforming the loan forgiveness program.

Warren and other Democrats continue to demand large student debt forgiveness from all borrowers, and Warren was previously an insider. interview The student loan company “could do a terrible job” and “the times are over”.

“The world of student loan debt servicers has changed,” Warren said. “They can’t sign the contract, do poor work, spend huge amounts of money on the borrowers, and still can’t renew their contract.”

Read the original article Business insider