MW Student-loan borrowers struggle to access repayment plans. Advocates worry about 'chaos.'

By Jillian Berman

The Trump administration's push for efficiency could result in student-loan borrowers receiving the bare minimum of service just as millions of them need help staying on track

Student-loan borrowers and their advocates have been bracing for change ever since President Donald Trump won the election. A series of developments in recent weeks now have them expecting disruption for borrowers looking to get accurate information about their student-loan bills and to stay current on their debt.

Already, the Trump administration has - at least temporarily - cut off access to affordable repayment programs for borrowers not already in them. Now there's growing concern that borrowers could face other obstacles to managing their debt, and with a freeze on he watchdog overseeing the student-loan industry, advocates fear borrowers will struggle to get help navigating those obstacles.

The next several weeks already mark a crucial period for student-loan borrowers. For the first time in five years, they're set to face drops in their credit scores and other consequences for not paying on their loans. More than 40% of borrowers who are supposed to be making payments on their loans haven't been paying their monthly bill, according to an analysis of government data from VantageScore, a credit-score company.

It's these borrowers who typically need the most help from servicers and the government in order to get back on track. But the Elon Musk-led Department of Government Efficiency has been looking for ways to make cuts to agencies. DOGE staffers directed personnel at the Office of Federal Student Aid, which oversees the student-loan program, to find ways to slash spending on loan servicing to $400 million, according to an early February email reviewed by MarketWatch. The push to cut contracts for servicing and related activities came after DOGE staffers arrived at the agency, according to multiple sources familiar with the plans.

Over the past few years, the government has paid servicers about $1 billion per year.

'Let go of the Cadillac service and opt for the Toyota'

In the email, an FSA official challenged some of the agency's staff to evaluate their contracts to "determine what is the bare minimal services ... needed for us to provide our stakeholders with services."

The email continued: "I understand there has been significant work done to improve customer service, however we now need to let go of the Cadillac service and opt for the Toyota."

Already, the effort to slash costs has resulted in getting rid of the team with the capability to send emails to all student-loan borrowers at once, according to one source familiar with FSA's cost-cutting efforts.

Other proposals for cuts that have circulated in recent weeks, according to documents viewed by MarketWatch, include increasing the abandon rate - or the acceptable share of calls that servicers drop - from 4% to 8%, decreasing call-center hours and ending the enhancement of studentaid.gov, the website borrowers use to access their loan information, along with its virtual assistant.

More serious proposed cuts include getting rid of two-factor authentication and outreach to borrowers. But even if the FSA implemented all of the suggestions, the agency wouldn't get anywhere close to the $400 million target, according to estimates of the savings in presentations proposing the cuts.

"As the government pulls back funding for essential services, of course it's the borrowers who will be left in the lurch," said Julia Barnard, who was the student-loan ombudsman at the Consumer Financial Protection Bureau before she was terminated earlier this month. "This is already happening, and it's on track to accelerate."

A Department of Education spokesperson wrote in an emailed statement that the agency is "committed to delivering meaningful and lasting results to both the taxpayers and the students we serve."

The spokesperson continued: "President Trump was elected to enact unprecedented reform and restore accountability across the federal bureaucracy. To that end, the Department is evaluating all contracts and grants to identify waste, fraud, and areas for improvement."

DOGE did not respond to a request for comment.

Central to the borrower experience

Though it may seem an obscure part of the federal government, the FSA and its contractors are central to borrowers' day-to-day experience with their student loans. They help borrowers do things such as sign up for affordable repayment plans, access debt-relief programs and enroll in autopay programs. The push to find savings comes after years of Congress flat-funding the FSA and therefore servicers as well.

"There is not a lot of fat to trim," said Clare McCann, the managing director of policy and operations at the Postsecondary Equity & Economics Research Center, an organization housed at American University that uses research to influence higher-education policy. Any cuts would likely result in less outreach to borrowers who need help getting back on track in repaying their loans, she said.

Even borrowers who have relatively straightforward loan arrangements could face challenges, given the strain already present in the student-loan system. "The No. 1 issue borrowers were talking to us about was actually related to payment processing, extremely basic errors in the system," said Barnard, the former CFPB ombudsman.

Not only would cuts to customer service create financial and logistical headaches for borrowers, it could also put the student-loan program at risk of getting less of its money back.

"If we have fewer borrowers making payments on their loans, that's not great for the federal fiscal position," said Preston Cooper, a senior fellow at the American Enterprise Institute, a right-leaning think tank.

If officials cut the quality of customer service just as the student-loan system is undergoing a huge transition back into consequences for nonpayment, "you might end up losing more money than you're really saving," Cooper said.

Applications for affordable repayment plans disappear from website

Meanwhile, the Trump administration has, at least temporarily, gotten rid of the repayment options that allow struggling borrowers to stay current on their loans. The Department of Education took down the application for income-driven repayment plans from its website late last week. These plans, which have existed in some form since the early 1990s, allow borrowers to repay their debt as a percentage of their income and to have the remainder canceled after a certain number of years of repayment.

The applications were removed from the site following an order from a federal appeals court in litigation surrounding the SAVE plan, the Biden administration's version of income-driven repayment. The court blocked the government from continuing with the plan while the case, which was brought by Republican-led states, works its way through the court system. A lower court will now evaluate arguments and ultimately issue a final ruling.

Because SAVE built off an earlier version of income-driven repayment, some have interpreted the court rulings in the case to apply to other income-driven plans as well.

"By shutting off access to these plans, it's clear that the Trump administration has taken the maximal view" and applied the ruling "as broadly as possible," said Persis Yu, the deputy executive director of the Student Borrower Protection Center, an advocacy group.

What that means for now is that borrowers who aren't already in income-driven repayment plans can't apply for them. These are typically the most affordable options available to keep borrowers current on their loans.

"Millions of borrowers are delinquent, and those borrowers need to get into a repayment plan now," said Yu, noting that other available options are "not going to be affordable for a lot of folks."

More broadly, the situation continues a pattern that's been playing out over the past few years in which millions of borrowers can't reliably figure out what their monthly payments are each month amid legal battles.

"These are massive financial obligations, and borrowers have no idea right at this moment even what the terms of their loans are," Yu said. "Borrowers' promissory notes that wrote in these repayment plans, that wrote in the promise of cancellation at a certain period of time, these are the notes that they agreed to when they took on this debt. They don't know if the terms of the loan are going to be recognized."

Watchdog fielding borrower complaints is sidelined

And while borrowers wait to see if they'll have access to the benefits they were promised or if significant call wait times will stymie them as they seek help managing their debt, the government watchdog responsible for ensuring that borrowers' rights are respected is out of a job.

Earlier this month, the CFPB's acting director, Russell Vought, closed the bureau's headquarters and ordered staff to stop working. The Trump administration also fired some staff en masse.

"I'm not arrogant enough to believe that we could have solved all of these problems, but I am indeed worried that student-loan borrowers have a rough road ahead and may not have many advocates in the government," Barnard said.

Barnard said she publicly expressed worry last year about "widespread failures of the student-loan system."

Now, she said, "I have other concerns that I think of as tsunamis heading straight for the shore," including "mass chaos and confusion" resulting from litigation surrounding the student-loan program and from the pause on the CFPB's activity, including its work monitoring complaints and overseeing student-loan companies, leaving millions of borrowers at risk of defaulting on their debt.

MW Student-loan borrowers struggle to access repayment plans. Advocates worry about 'chaos.'

By Jillian Berman

The Trump administration's push for efficiency could result in student-loan borrowers receiving the bare minimum of service just as millions of them need help staying on track

Student-loan borrowers and their advocates have been bracing for change ever since President Donald Trump won the election. A series of developments in recent weeks now have them expecting disruption for borrowers looking to get accurate information about their student-loan bills and to stay current on their debt.

Already, the Trump administration has - at least temporarily - cut off access to affordable repayment programs for borrowers not already in them. Now there's growing concern that borrowers could face other obstacles to managing their debt, and with a freeze on he watchdog overseeing the student-loan industry, advocates fear borrowers will struggle to get help navigating those obstacles.

The next several weeks already mark a crucial period for student-loan borrowers. For the first time in five years, they're set to face drops in their credit scores and other consequences for not paying on their loans. More than 40% of borrowers who are supposed to be making payments on their loans haven't been paying their monthly bill, according to an analysis of government data from VantageScore, a credit-score company.

It's these borrowers who typically need the most help from servicers and the government in order to get back on track. But the Elon Musk-led Department of Government Efficiency has been looking for ways to make cuts to agencies. DOGE staffers directed personnel at the Office of Federal Student Aid, which oversees the student-loan program, to find ways to slash spending on loan servicing to $400 million, according to an early February email reviewed by MarketWatch. The push to cut contracts for servicing and related activities came after DOGE staffers arrived at the agency, according to multiple sources familiar with the plans.

Over the past few years, the government has paid servicers about $1 billion per year.

'Let go of the Cadillac service and opt for the Toyota'

In the email, an FSA official challenged some of the agency's staff to evaluate their contracts to "determine what is the bare minimal services ... needed for us to provide our stakeholders with services."

The email continued: "I understand there has been significant work done to improve customer service, however we now need to let go of the Cadillac service and opt for the Toyota."

Already, the effort to slash costs has resulted in getting rid of the team with the capability to send emails to all student-loan borrowers at once, according to one source familiar with FSA's cost-cutting efforts.

Other proposals for cuts that have circulated in recent weeks, according to documents viewed by MarketWatch, include increasing the abandon rate - or the acceptable share of calls that servicers drop - from 4% to 8%, decreasing call-center hours and ending the enhancement of studentaid.gov, the website borrowers use to access their loan information, along with its virtual assistant.

More serious proposed cuts include getting rid of two-factor authentication and outreach to borrowers. But even if the FSA implemented all of the suggestions, the agency wouldn't get anywhere close to the $400 million target, according to estimates of the savings in presentations proposing the cuts.

"As the government pulls back funding for essential services, of course it's the borrowers who will be left in the lurch," said Julia Barnard, who was the student-loan ombudsman at the Consumer Financial Protection Bureau before she was terminated earlier this month. "This is already happening, and it's on track to accelerate."

A Department of Education spokesperson wrote in an emailed statement that the agency is "committed to delivering meaningful and lasting results to both the taxpayers and the students we serve."

The spokesperson continued: "President Trump was elected to enact unprecedented reform and restore accountability across the federal bureaucracy. To that end, the Department is evaluating all contracts and grants to identify waste, fraud, and areas for improvement."

DOGE did not respond to a request for comment.

Central to the borrower experience

Though it may seem an obscure part of the federal government, the FSA and its contractors are central to borrowers' day-to-day experience with their student loans. They help borrowers do things such as sign up for affordable repayment plans, access debt-relief programs and enroll in autopay programs. The push to find savings comes after years of Congress flat-funding the FSA and therefore servicers as well.

"There is not a lot of fat to trim," said Clare McCann, the managing director of policy and operations at the Postsecondary Equity & Economics Research Center, an organization housed at American University that uses research to influence higher-education policy. Any cuts would likely result in less outreach to borrowers who need help getting back on track in repaying their loans, she said.

Even borrowers who have relatively straightforward loan arrangements could face challenges, given the strain already present in the student-loan system. "The No. 1 issue borrowers were talking to us about was actually related to payment processing, extremely basic errors in the system," said Barnard, the former CFPB ombudsman.

Not only would cuts to customer service create financial and logistical headaches for borrowers, it could also put the student-loan program at risk of getting less of its money back.

"If we have fewer borrowers making payments on their loans, that's not great for the federal fiscal position," said Preston Cooper, a senior fellow at the American Enterprise Institute, a right-leaning think tank.

If officials cut the quality of customer service just as the student-loan system is undergoing a huge transition back into consequences for nonpayment, "you might end up losing more money than you're really saving," Cooper said.

Applications for affordable repayment plans disappear from website

Meanwhile, the Trump administration has, at least temporarily, gotten rid of the repayment options that allow struggling borrowers to stay current on their loans. The Department of Education took down the application for income-driven repayment plans from its website late last week. These plans, which have existed in some form since the early 1990s, allow borrowers to repay their debt as a percentage of their income and to have the remainder canceled after a certain number of years of repayment.

The applications were removed from the site following an order from a federal appeals court in litigation surrounding the SAVE plan, the Biden administration's version of income-driven repayment. The court blocked the government from continuing with the plan while the case, which was brought by Republican-led states, works its way through the court system. A lower court will now evaluate arguments and ultimately issue a final ruling.

Because SAVE built off an earlier version of income-driven repayment, some have interpreted the court rulings in the case to apply to other income-driven plans as well.

"By shutting off access to these plans, it's clear that the Trump administration has taken the maximal view" and applied the ruling "as broadly as possible," said Persis Yu, the deputy executive director of the Student Borrower Protection Center, an advocacy group.

What that means for now is that borrowers who aren't already in income-driven repayment plans can't apply for them. These are typically the most affordable options available to keep borrowers current on their loans.

"Millions of borrowers are delinquent, and those borrowers need to get into a repayment plan now," said Yu, noting that other available options are "not going to be affordable for a lot of folks."

More broadly, the situation continues a pattern that's been playing out over the past few years in which millions of borrowers can't reliably figure out what their monthly payments are each month amid legal battles.

"These are massive financial obligations, and borrowers have no idea right at this moment even what the terms of their loans are," Yu said. "Borrowers' promissory notes that wrote in these repayment plans, that wrote in the promise of cancellation at a certain period of time, these are the notes that they agreed to when they took on this debt. They don't know if the terms of the loan are going to be recognized."

Watchdog fielding borrower complaints is sidelined

And while borrowers wait to see if they'll have access to the benefits they were promised or if significant call wait times will stymie them as they seek help managing their debt, the government watchdog responsible for ensuring that borrowers' rights are respected is out of a job.

Earlier this month, the CFPB's acting director, Russell Vought, closed the bureau's headquarters and ordered staff to stop working. The Trump administration also fired some staff en masse.

"I'm not arrogant enough to believe that we could have solved all of these problems, but I am indeed worried that student-loan borrowers have a rough road ahead and may not have many advocates in the government," Barnard said.

Barnard said she publicly expressed worry last year about "widespread failures of the student-loan system."

Now, she said, "I have other concerns that I think of as tsunamis heading straight for the shore," including "mass chaos and confusion" resulting from litigation surrounding the student-loan program and from the pause on the CFPB's activity, including its work monitoring complaints and overseeing student-loan companies, leaving millions of borrowers at risk of defaulting on their debt.

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February 27, 2025 10:52 ET (15:52 GMT)

MW Student-loan borrowers struggle to access -2-

Before she and other colleagues were terminated in February, Barnard and her team were reviewing thousands of complaints each month to look for systemic issues that could be addressed through policy changes or enforcement. They were also scanning for complaints that could benefit from escalation.

"I was working directly with borrowers. I'm extremely proud of the work we did helping people navigate the system," she said. "We know how hard that can be for people when they go it alone."

Court documents from litigation around the dismantling of the CFPB highlight one example of this work.

Eva Steege is an 83-year-old pastor who is one of the named plaintiffs in a suit accusing the Trump administration of illegally dismantling the CFPB. According to the complaint, she was supposed to have a meeting in February with CFPB staff after years of trying to get into Public Service Loan Forgiveness, a program that allows borrowers who work for the government and for certain nonprofits to have their federal debt canceled after 10 years of payments.

But after the Trump administration began telling CFPB staffers to stop their work, her meeting was canceled, court documents claim. Steege was hoping to get assistance in having her debt wiped out and getting back as much as $15,000 in overpayments. Getting the help quickly is crucial, because doctors have told Steege she has less than six months to live and she wants to be sure she can pass the money she is owed on to her family, the lawsuit states.

Now, "absent the CFPB's assistance, it is unlikely that she will be able to discharge her debt and get her overpayments returned before she passes away," her attorneys wrote in court documents.

For borrowers looking for guidance from the CFPB, Barnard said, "I want them to know that I do not think they should wait to seek help elsewhere." She suggests they forward complaints to their congressional offices or to the Department of Education's ombudsman's office.

"It was the honor of my life to serve in the role and to have been an advocate for the incredible borrowers who reached out for help into the void," she said. "I'm still thinking of them and fighting for them."

-Jillian Berman

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 27, 2025 10:52 ET (15:52 GMT)

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