- Student-loan borrowers are facing major repayment changes.
- Democratic lawmakers said the changes put borrowers at heightened risk of customer service errors.
- Servicing errors can be costly, leading some borrowers to put off saving for their futures.
Changes are coming to student-loan repayment, and Democratic lawmakers are warning that it could lead to costly servicing mistakes for borrowers.
On Sunday night, Democratic Sens. Elizabeth Warren, Ed Markey, Jeff Merkley, Richard Blumenthal, Cory Booker, and Chris Van Hollen sent letters, exclusively viewed by Business Insider, to all five federal student-loan servicers regarding their abilities to assist borrowers amid major changes to repayment.
The letters come as servicers are working with the Department of Education to roll out changes signed into law in President Donald Trump's "big beautiful" spending legislation, including creating new repayment plans and borrowing caps. Additionally, collections resumed on defaulted borrowers' student loans after a five-year pause, all while the administration is working to dismantle the Department of Education.
The lawmakers wrote in their letters to the federal servicers that, given the slew of changes, it's imperative that borrowers can receive help from their servicers, along with accurate paperwork processing.
"Student loan servicers' administrative errors have significant financial consequences for borrowers, including delayed rent payments, loss of mortgage eligibility, postponed retirement contributions, and even risk of homelessness," the lawmakers wrote. "Borrowers pay the price for servicers' neglect and incompetence."
The Consumer Financial Protection Bureau wrote in its 2024 annual student-loan report that servicer errors, such as incorrect payment processing and difficulties contacting customer service agents, led to "significant downstream consequences" that caused borrowers to be late on their monthly bills and even put some at risk of homelessness.
With the administration halting the CFPB's work, the lawmakers wrote that borrowers are at a greater risk of being scammed by actors posing as federal servicers, enhancing the need for clear servicer communication. They requested that the servicers answer a series of questions by December 22, including data on call center volume, staffing numbers, and communications to borrowers in delinquency or default.
"As loan repayment due dates and requirements have changed repeatedly for many borrowers under the Trump Administration, borrowers need clear and timely communication from federal student loan servicers," they said.
The consequences of servicer errors
Customer service challenges have plagued student-loan borrowers for years.
Former President Joe Biden's Education Department released a memo in 2023 detailing the errors borrowers have experienced with their servicers. It included incorrect monthly bills, late or no billing statements, mistakenly taking borrowers out of forbearance, and long hold times with customer agents. The mistakes were costly — some borrowers told Business Insider at the time that interest grew on their balances while they attempted to resolve the errors, and they could not afford the incorrect payment amounts.
The challenges persisted into the Trump administration. While Democratic lawmakers said that Trump's attempts to dismantle the Department of Education will harm borrowers due to even less staffing and oversight, the department said it plans to expand the ombudsman's office to ensure borrowers are better equipped to manage their debt.
The department is also soliciting feedback on creating a "common manual" to serve as a centralized place for servicing practices, intended to help the department bolster servicer oversight.
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