Biden’s next student loan headache: A cash crunch at the Education Department

A funding shortfall is forcing Education Department officials to cut customer service to student loan borrowers just as the agency prepares to send millions of Americans their first bills in more than three years.

Congress last year rejected the White House’s request for more money to administer the federal student loan program after Republicans balked at adding extra funds that could be used to implement President Joe Biden’s student debt cancellation plan.

At the same time, the agency’s costs exploded as it implemented a range of new policies, such as expanding the Public Service Loan Forgiveness program and creating a new application process for canceling up to $20,000 of student debt. Education Department officials, congressional Democrats and consumer advocacy groups are now worried that the Biden administration may not have enough money to smoothly transition borrowers back into repaying their debt when payments are set to resume later this year.