Pew Letter Offers Guide for Better Borrower Outreach Amid Government Reforms

The Office of Federal Student Aid (FSA) faces unprecedented challenges over the coming months. This includes the end of the almost three-year moratorium on most federal student loans and the transition of millions of borrowers back into repayment, ongoing loan transfers across servicers, implementation of the Fresh Start initiative to bring borrowers’ defaulted loans back into good repayment standing, rolling out debt cancellation for eligible borrowers, and the implementation of a new income-driven repayment plan.

In a letter to FSA Chief Operating Officer Richard Cordray, The Pew Charitable Trusts’ student loan research and student borrower success teams draw insights from new data on how borrowers who have experienced default perceived communication with their servicers. The letter is intended to help FSA and its servicing contractors—who often correspond directly with borrowers—provide effective and consistent communication about these upcoming events and initiatives with the goal of promoting borrowers’ long-term repayment success.

Pew’s takeaways for FSA, which come from a recent nationally representative survey of student loan borrowers, include:

• Nearly two-thirds of borrowers who have experienced default did so multiple times, making borrowers with default experience especially vulnerable to re-default. We urge FSA to provide these borrowers with proactive, consistent, and clear communications about its initiatives to ensure that they fully benefit.
• Prior to their loans defaulting, borrowers with default experience were more likely than those who had never experienced default to report ever having communicated with their servicer. However, they were less likely to say that they usually initiated the communication with their servicer than those who had never experienced default.
• Regardless of default experience, most borrowers reported phone calls as the most effective mode of communication. Phone communication may be crucial for the successful rollout of FSA’s plans, and servicers must be prepared to support increased call volume by prioritizing phone outreach.