Letter to Christian Thornton, CEO Granite State Management & Resources - Transfer of Student Loan Accounts

Letter

Dear Ms. Thornton:

We request an update on your company's efforts to ensure a smooth transfer of tens of
millions of borrowers' accounts to new student loan servicers. In the past few months, the
Pennsylvania Higher Education Assistance Agency (PHEAA), Granite State Management &
Resources (Granite State), and the Navient Corporation (Navient) have announced they are not
renewing their contracts or transferring their contract to a new operator, meaning about 16
million borrowers will have their accounts moved. Student loan servicers have a long history of
misleading borrowers about available options, mismanaging programs, and cheating borrowers
out of protections developed to help them pay back their student loans. In previous transfers,
failures to transfer complete and accurate information left hundreds of thousands of borrowers
with account problems that continue to plague the federal loan portfolio today.

For years, government agencies and advocacy groups have identified missteps by loan
servicers, especially PHEAA and Navient, that have harmed borrowers. The Consumer Financial
Protection Bureau (CFPB), New York Attorney General Letitia James, and the Department of
Education (ED) have all investigated PHEAA's mismanagement of the Public Service Loan
Forgiveness (PSLF) program. Borrowers failed to receive relief to which they were entitled
because PHEAA delayed recertifying their enrollment in an income-drive repayment (IDR) plan, placed borrowers in forbearance or deferment, and miscounted qualifying payments. Navient has been scrutinized by the Federal Communications Commission, the National Consumer Law
Center, and the CFPB, for "harassing and abusing" their borrowers and "ma[king] it difficult for
borrowers to repay their loans." Navient also has repeatedly provided inaccurate information,
incorrectly processed payments, and been unresponsive to borrowers concerns.

Given this history, we are concerned that the upcoming transition of 16 million borrowers
to a new servicer will result in further harm. During past servicer transitions, millions of
mistakes and problems caused borrowers to lose months of qualifying payments toward
forgiveness in the PSLF and IDR programs, deal with incorrect loan balances, or face penalties
due to incorrectly processed payments. The CFPB found that even in normal circumstances,
service transfers are a cause for concern, as they can mean surprise fees and a loss of benefits for
borrowers: "Servicing transfers can create confusion when companies have different policies and
procedures. . . payments may be lost, consumers may incur surprise late fees, and processing
problems and missing account records can knock borrowers off track on repaying their loans."
These risks are even greater when there will be a mass transfer of millions of accounts.

It is therefore imperative that your company conduct a full review of your borrowers'
accounts to address any inaccuracies or other problems before transferring the accounts to a new
servicer. Furthermore, your company must maintain documents and adequate staffing for a
sufficient transitional period after leaving the federal student loan servicing program, in order to
ensure that errors discovered at a future date can be corrected.

This matter is made more urgent because there are only 90 days until the end of the pause
in student loan payments that has been in place since the beginning of the COVID-19 public
health emergency, which will result in a resumption of payments of scheduled payments on January 31, 2022 for tens of millions of borrower's accounts.9 This restart is expected to be an
unprecedented logistical challenge for borrowers, the Department of Education, and loan
servicers. After having their payment and interest suspended for nearly two years, more than a
third of all federal borrowers will also be returning to repayment with a new servicer, which has
the potential to lead to confusion, delays, and an unusually high need for customer service
support.

Finally, ED recently announced an overhaul of the Public Service Loan Forgiveness
(PSLF) program, which will give hundreds of thousands of public servants an opportunity to
move closer to forgiveness. A recent survey conducted by Sen. Warren's office found that
borrowers of color are less likely to know about PSLF and to have taken steps to access the
program.12 With PHEAA exiting the loan servicing program and borrowers who intend to pursue
PSLF being transferred to new servicers, there is a heightened risk that important information
about these limited-time waiver opportunities will not reach all borrowers. It is especially
important to correct errors in these borrowers' accounts so that they can take advantage of this
chance to qualify for the loan forgiveness they deserve.

To address this unprecedented restart and the transfer of around 16 million borrowers, we
write to seek information about your transition plan to ensure that borrowers' accounts and
information are accurate, and your plans for document retention and transitional staffing. We ask
that you provide answers to the following questions no later than November 17, 2021:

1. What is your plan to communicate with borrowers about the transition?
a. Have you already conducted outreach to borrowers about the transfer? If so,
please describe the notices that were sent out, their format, and how many
borrowers were reached.
b. How have you communicated information to borrowers about the recently
announced waiver and appeals opportunities in the PSLF program?
2. Has your company conducted an interval review of borrowers' accounts ahead of the
transition?
a. Specifically, has your company conducted an interval review of borrowers'
income driven repayment (IDR) plans ahead of the transition?
i. If so, what are the most common errors?
ii. If so, what are the most common reasons for errors?
b. Do you expect all errors to be corrected before borrowers are transferred to a new
servicer?
i. If not, what are the barriers to implementing necessary corrections?
ii. If not, what actions are you taking to assist borrowers in having these
errors corrected by their new servicer?
3. Please describe your company's document retention plan. Please provide specific details
on your company's document retention plan pertaining to records of borrowers eligible
for PSLF.
a. How long will your company maintain records for its current borrowers?
b. How are these records being made available to the borrower now and in the
future, and to their future servicer?
c. How does your company document complaints or other notes and information
from borrower communications and will these be made available to their future
servicer?
4. Please describe your company's transitional staffing plan and how it will ensure that
borrowers and their future servicers can obtain support from your company with
correcting any problems discovered after their transition to a new servicer. Please provide
specific details on your company's transitional staffing plan as it relates to supporting
borrowers eligible for PSLF.
a. For what period of time does your company plan to maintain staff?
b. How many staff members does your company plan to maintain to specifically
help borrowers with questions and concerns during the transitional period?
c. How is your company sharing training materials, lessons learned, and other
materials with ED and other servicers?
5. Please describe your company's compliance management system and how it will ensure
senior leadership will be made aware of issues that arise related to the transition.
a. Will your company self-report issues that implicate compliance with federal
consumer financial law to the Consumer Financial Protection Bureau, or the
relevant state financial regulator or state attorney general?
b. Where your company has self-reported an issue to a federal or state consumer
protection official, will your company automatically notify the appropriate staff at
the Office of Federal Student Aid?