Introduction

There was a time when Jason, a Black man in his mid-30s, found his student loan payment to be manageable.¹ Even though he had not graduated, Jason was able to secure a job, an apartment, and a car after leaving college. Yet things started to unravel when he lost his job. He lost his car and apartment next, and his health deteriorated as he struggled with pneumonia and asthma.

Even though it was easy to pause his loans temporarily, Jason had a much harder time getting further help over the phone from his servicer, the company the Department of Education (ED) had put in charge of managing his federal loans. His calls often were sent to voicemail or directed to a representative who spoke English as a second language, complicating communication. Seeing no other options, and still preoccupied with keeping the rest of his life together, Jason defaulted once his loan pauses ran out.

No borrower wants to default on their student loans. In Jason’s case, default made it only harder to get back on his feet. When he secured another job, a minimum-wage retail position, ED garnished his meager paychecks. And his poor credit, as a result of defaulting, made it impossible for him to get an auto loan so he could once again have a reliable car.

Unfortunately for Jason, he was unaware at the time of his default that Congress and ED had already created long-term loan relief options to make repayment more affordable for borrowers in his situation. ED offers income-driven repayment (IDR) programs, which set borrowers’ monthly payments as a percentage of their income. Under these programs, borrowers whose income falls below a certain amount do not have to make any payments.

As Jason’s case illustrates, even the most generous relief options are of little use to the borrowers who need them the most, if borrowers do not know about them. Despite reading some of his servicer’s communications and proactively reaching out for help, Jason never learned that he was eligible for a repayment plan that could have lowered his payments for as long as he had low earnings. Jason’s experience is not uncommon. According to Varying Degrees, New America’s nationally representative survey conducted in 2022, more than 40 percent of low-income borrowers who likely would benefit from IDR never heard about the option.²

ED and its contractors have not been successful in making vulnerable borrowers aware of a range of loan management options, not just IDR plans. Focus groups of 47 borrowers that New America conducted in 2022 show that vulnerable borrowers are unaware of forgiveness and discharge programs, including programs for which they may be eligible.³ Many borrowers do not even know where to turn to for loan information: A survey of more than 1,600 student loan borrowers by The Pew Charitable Trusts in 2021, for example, shows that about half of borrowers who had defaulted said they had not known how to contact their student loan servicers prior to defaulting.⁴

Student loan communication is further complicated by a pandemic-related pause on student loan payments which ended last September. After a three-and-half-year payment pause, 22 million borrowers owed non-zero payments—among them, more than four million recent college students who entered repayment for the first time.⁵ To smooth the return to repayment and help borrowers avoid the worst consequences of missed payments, ED created a transition period (also known as the on-ramp period) in which borrowers who miss payments will not be considered delinquent and therefore cannot default on their loans. The on-ramp period ends September 30, 2024.⁶ At that point, collections will resume for the approximately 6.8 million borrowers currently in default.⁷ After the amount of time that must pass before a non-paying borrower defaults, 270 days, millions of other borrowers may newly enter default on their loans.

The Biden administration created several new repayment and forgiveness options to help borrowers return to repayment and to fix long-standing problems with student loan affordability. Yet the new policies do not relieve pressure for improved outreach to borrowers. While the new options offer much-needed support to struggling borrowers, many of them are also not automatic. Borrowers need to be aware of these programs and take action to enroll.

Unless they learn about and enroll in existing and new relief programs, borrowers from marginalized backgrounds are at particular risk of default when the on-ramp ends. These borrowers are the most likely to struggle with their loans, and therefore the most in need of information about student loan relief. Research confirms that borrowers who default on their loans are likely to be low-income, Black, older, first in their family to attend college, alumni of for-profit colleges, and non-completers.⁸

To ensure that vulnerable borrowers like Jason no longer miss out on crucial relief options ahead of the end of the on-ramp, New America sought to learn how ED and its servicers can improve student loan communications and outreach. Since many struggling borrowers qualify for public benefit programs like Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and the refundable Child Tax Credit (CTC), we set out to learn how these benefit agencies conduct outreach to their beneficiaries. We believe ED and its servicers can adopt lessons from these benefits programs to improve their outreach.

To learn about the outreach strategies from these benefit programs, we interviewed policy experts, staff at community-based organizations, and consultants specializing in communication. We also spoke to people involved with student loan outreach, including people knowledgeable about operations at the Department of Education, student loan servicers, and nonprofits partnered with ED to promote IDR enrollment.⁹ The report synthesizes relevant research and findings from more than 20 interviews into a set of best practices and recommendations for Congress, student loan servicers, and the Department of Education.