Executive Summary

When the pandemic-related pause on student loan repayment ended last September, more than 20 million borrowers had payments due for the first time in three and a half years, including four million who had never entered repayment before. To smooth this transition, the Biden administration created an on-ramp period temporarily protecting borrowers from the worst consequences of missed payments. But in September 2024, debt collection on defaulted loans will resume, and millions of borrowers could head towards default. In preparation, the Department of Education (ED) and its contractors, called servicers, have started reconnecting with borrowers and informing them about options for repayment, including several new programs for debt relief.

However, ED and servicers have not always been successful in helping borrowers take advantage of loan management options. For instance, more than 40 percent of low-income borrowers do not know about income-driven repayment plans, which can provide affordable or zero-dollar monthly payments. History suggests that, unless outreach improves, borrowers from marginalized backgrounds—including those who are low-income, Black, or did not graduate college—are at high risk of default when the on-ramp ends.

New America sought to learn how ED and its servicers can improve student loan communications and outreach, so that vulnerable borrowers can avoid default. Since vulnerable borrowers often also qualify for public benefit programs like Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and the refundable Child Tax Credit (CTC), we studied how these benefit agencies conduct outreach. After interviewing more than 20 experts, including staff at community-based organizations, consultants specializing in communication, and experts who are familiar with ED and loan servicing, we believe that ED and its servicers can improve their efforts in three areas.

• Outreach: ED and servicers that mostly rely on emails and phone calls should expand the number and types of channels they use to engage with borrowers, including mailing letters, texting, and sending push notifications. ED should also strengthen partnerships with other government agencies and community-based organizations, enlisting their help in reaching out to beneficiaries who are also student loan borrowers. Lastly, using ongoing evaluation, ED should make timely adjustments to its outreach efforts.
• Messaging: Messages to borrowers should be tailored to a particular audience, and be concise, jargon-free, and focused on one call to action. ED and servicers already conduct some message testing, but they should test all communications, from text messages to website wording, with borrowers to verify that the message is clear and effective.
• Enrollment assistance: Helping vulnerable borrowers should go beyond providing information to include improvements to program design. Some loan relief programs require cumbersome applications, so one-on-one assistance programs, similar to the Affordable Care Act navigators, can help borrowers through the process. ED should also conduct user testing to simplify application design. As a long-term solution, ED should continue to pursue automatic enrollment in relief programs using data matching.

ED and servicers are already making improvements in these areas, but they can expand their efforts. Since many of these changes will require substantial financial resources, Congress should provide more funding for borrower outreach and assistance. Borrowers deserve this investment in timely and effective support as they navigate the return to repayment.