Senator Elizabeth Warren (D-MA) grilled two student loan servicers and hosted experts at a student loan hearing on Tuesday before sitting down with Yahoo Finance to describe her argument for President Biden to unilaterally cancel $50,000 in federally-backed student loans for tens of millions of Americans.
"Overall, in this hearing, it was perfectly clear [that] we have a broken student loan system," Warren, chairwoman of the Subcommittee on Economic Policy at the Senate Committee on Banking, Housing, and Urban Affairs, told Yahoo Finance Presents (video above).
"We’ve got these middlemen, these student loan debt servicers that were with us today, who can’t seem to keep straight," she said, adding that issues with servicers are "just one more example of the United States government is running a massive student loan program that is really putting a burden on tens of millions of people around this country. That makes no sense."
Warren said that the testimonies and responses provided by two of the student loan servicers who attended the hearing, Navient and the Pennsylvania Higher Education Assistance Agency (PHEAA), solidified her position on the servicers' roles in creating the crisis.
"The federal government should absolutely fire Navient," Warren told Jack Remondi, the company's CEO, during the hearing. "And because this happened under your leadership, Navient should fire you." She also called on the U.S. government to stop working with PHEAA.
"It just seems pretty straightforward to me on that," Warren told Yahoo Finance. "These student loan debt servicers, they’re making buckets of money to help their bottom line, but not to help the students who are really in trouble trying to repay their loans."
In response to Warren's statements, an ED Spokeswoman Kelly Leon told Yahoo Finance that the agency is mindful of the burden of student loans and realizes that it's "critically important that we take a thorough look at our entire borrowing and repayment system, including the companies hired to assist us."
Navient (NAVI) services federally-backed loans for roughly 5.6 million borrowers and holds an estimated $58 billion in Federal Family Education Loans. PHEAA services federal loans for borrowers who are on track for Public Service Loan Forgiveness.
"While today’s hearing is focused on the problems with today’s loan program, it is important to recognize the good the program achieves," Navient's Remondi said in his testimony. "We see evidence — day in and day out — of people who have successfully attained higher education achievements and upward economic mobility because of the financial assistance from federal student loans."
"We’ve got these middlemen, these student loan debt servicers that were with us today, who can’t seem to keep straight," Warren told Yahoo Finance. "They get sued over and over. And yet there’s no accountability." (Navient set up a page to respond to the various lawsuits' allegations).
'Calling for immediate cancellation of $50,000 of student loan debt'
Warren explained that all of the issues raised in Tuesday's hearing are why "Senator Schumer and I are calling for immediate cancellation of $50,000 of student loan debt, something that President Biden could do this evening."
Warren and Senate Majority Leader Chuck Schumer (D-NY) have both repeatedly urged a skeptical Biden to cancel $50,000 in federally-held student loan debt via executive action (as opposed to legislation passed by Congress).
White House Chief of Staff Ron Klain recently told Politico that the president asked Education Secretary Miguel Cardona to "prepare a memo on the president's legal authority" before any decision.
ED data recently sent to Warren's office showed that $50,000 in cancellation would erase the entire debt burden of more than 36 million student loan borrowers, including 9.4 million borrowers who are currently in default. (Other borrowers may be at risk of default after a payment pause and debt collection moratorium on qualifying loans ends after September 2021.)
"President Biden needs to hear from people," Warren said. "Senator Schumer and I are doing the best we can... But we need to put more wind in the sails we need to hear from more borrowers and their families. We could get this done. And we’re right at that moment."
Aarthi is a reporter for Yahoo Finance. She can be reached at firstname.lastname@example.org. Follow her on Twitter @aarthiswami.