The U.S. Division of Training is transferring ahead with an enormous overhaul of its federal pupil loan servicing system.
In a press launch this week, the Division introduced that it has signed servicing contracts with 5 new corporations who will take over federal pupil loan servicing: EdFinancial Companies, F.H. Cann & Associates LLC, MAXIMUS Federal Companies Inc., Missouri Greater Training loan Authority (MOHELA), and Texas Assured Scholar loan Company (Trellis Firm).
The servicing adjustments are a part of the Division’s shift to a single, centralized servicing platform. The 5 corporations who had been awarded contracts “will correspond with [student loan borrowers] via phone, chat, social media, postal mail, and email, and will support the back-office processing,” in line with the Division.
Training Secretary Betsy DeVos has argued that the servicing adjustments will result in higher outcomes and better accountability. “This is another major step toward our commitment to improving customer service and holding our contractors accountable for their performance,” she stated within the press launch.
Nevertheless, the Division has traditionally achieved a poor job of holding its servicers accountable, in line with its personal inspector common. And pupil loan servicing transfers can usually be messy for debtors. The Shopper Monetary Safety Bureau famous in 2015, following the Division’s final main servicing overhaul, that “servicing transfers can create confusion when companies have different policies and procedures related to payment posting, allocation, and processing… When servicers change, payments may be lost, consumers may incur surprise late fees, and processing problems and missing account records can knock borrowers off track on repaying their loans.”
The present loan servicers that handle the Division’s huge federal pupil loan portfolio aren’t blissful. Nelnet, which is among the Division’s main contractors (together with Nice Lakes, Navient, and FedLoan Servicing) launched a scathing assertion after being denied a brand new contract with the Division of Training, stating that they’re “shocked” that “two of the highest rated servicers” (Nelnet and Nice Lakes) will “not be considered by the Department for this contract. We are frustrated and disappointed by this decision and the lack of transparency in the process.”
Nelnet acknowledged that they’d “pursue every legal avenue” to stay concerned within the federal pupil loan system – implying the potential for litigation. Nelnet has additionally filed formal protests with the Authorities Accountability Workplace (GAO), with a call anticipated in July.
The present servicing contracts expire on December 14, 2020, with two potential six-month extensions on the Division’s discretion by means of December 14, 2021. Thus, pupil loan debtors might see important servicer adjustments as quickly as the top of the yr.
Scholar loan debtors ought to think about periodically downloading and retaining related loan data, fee histories, and servicer correspondence to mitigate the chance of data being doubtlessly misplaced in bulk servicing transfers.