Senators criticize student-loan servicers'' refusal to answer inquiries as borrowers suffer

Chair Myrie opened the hearing by recounting a legislative information request to major student-loan servicers and said the response — or absence of it — exposed gaps in accountability. "Not one of them was willing to answer basic questions about how they treat the people whose loans they service," she said, and read letters from Navient, Earnest (Ernest), AidVantage (Advantage/Maximus) and MOHELA that redirected questions to other entities.

The chair highlighted federal and multi-state enforcement against Navient and noted that servicer responses often said the company had outsourced services or was a federal contractor and therefore unable to provide testimony. "No one is accountable, and the borrower is the one that is trapped inside," Myrie said.

Scott Buchanan (Student Loan Servicing Alliance), representing servicers, noted three fraud concerns in the student-lending market: identity-fraud applications creating fraudulent loans, fee-for-help counseling scams, and deceptive marketing by some schools. Buchanan said servicers are contractually constrained when they operate under Department of Education contracts and suggested the committee coordinate with ED for data and oversight access.

Gabriel O'Malley of DFS urged borrowers to file complaints with DFS for regulated entities, citing DFS's Student Protection Unit (SPU) and consumer-assistance efforts that returned money to consumers. "Our CAU office is very effective in mediating complaints and getting money back to consumers," O'Malley said, and offered to supply trend data to the committee on complaint types.

Lawmakers said they would follow up with the Department of Education, inquire into federal-contractor reporting restrictions, and seek clarification from servicers about what information can be shared with state oversight bodies.