In late 2015, the Obama administration announced an initiative to address our disastrous student loan servicing system by allowing borrowers to effectively bypass their loan servicers altogether. Few details beyond that initial announcement were provided.
This month, however, the U.S. Dept. of Education unveiled a more detailed outline for reducing servicing-related issues. The plan calls for the following:
- Standardized U.S. Dept. of Education branding so that borrowers are not confused when they have multiple federal student loan servicers or experience a servicing transfer.
- A single U.S. Dept. of Education web portal where all federal student loan borrowers can go for routine activity such as making payments, requesting a deferment, consolidating, changing repayment plans, or re-certifying for income-driven repayment. We already have seen the beginnings of this initiative through the Department’s new website, www.studentloans.gov, which allows borrowers to consolidate their federal loans or select an income-driven repayment plan. However, borrowers still have to work with their specific servicers for everything else.
- Reduced servicing transfers so borrowers don’t have to go through all of the associated confusion and hassle (like re-establishing an auto-debit arrangement).
- Stronger oversight and accountability so that servicers are less inclined to “mess up” and are more willing to work with borrowers. The Dept. of Education has already moved forward with one component of this by creating a new online complaint system – although it’s way too soon to measure its success.
I think these are all good steps, and if implemented thoughtfully, I think they can bring about some measurable benefits to federal student loan borrowers. That said, as we have seen with the recent servicer-related repayment plan delays, well-intended attempts at reform can lead to just a different category of problems. We’ll have to stay vigilant and keep the pressure on our elected officials to implement meaningful changes.
Have you had a problem with a student loan servicer? Tell your story to the Consumer Financial Protection Bureau.
Read the U.S. Dept. of Education’s official announcement regarding the latest servicing-related initiatives.
