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Betsy DeVos hits hard reset on student loan servicing contracts
Source: Washington Post
Betsy DeVos hits hard reset on student loan servicing contracts
By Danielle Douglas-Gabriel May 19 at 5:25 PM
The Education Department said Friday that it will select one company to collect student debt payments on its behalf, rather than the nine contractors that currently handle the federal government’s $1.2 trillion portfolio of education loans.
The decision, which would take effect once the existing contracts expire in 2019, reverses years of policy implemented by the Obama administration and would revive a servicing model that had an equal number of benefits and problems.
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In April, Education Secretary Betsy DeVos withdrew a series of policy memos issued by the Obama administration to strengthen consumer protections for student loan borrowers. She rescinded three memos that, among other things, called for the creation of financial incentives for targeted outreach to people at great risk of defaulting on their loans, a baseline level of service for all borrowers and a contract flexible enough to penalize servicers for poor service.
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On Friday, Manning said that rescinding the Obama-era memos was necessary to simplify servicing and prevent cost overruns that the department would not have been able to afford. He said the new contract will ensure “superior customer service,” but he was short on details other than to say the reforms will streamline the payment process and borrowers’ interactions with the servicer.
A review of the amended contract solicitation shows the department plans to strip out mandates aimed at helping borrowers who fall behind on payments and people enrolled in income-driven plans. The servicer would no longer be required to have specialists on hand to aid people in delinquency, nor would the company have to remind borrowers to reenroll in income-driven repayment weeks before the deadline.
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By Danielle Douglas-Gabriel May 19 at 5:25 PM
The Education Department said Friday that it will select one company to collect student debt payments on its behalf, rather than the nine contractors that currently handle the federal government’s $1.2 trillion portfolio of education loans.
The decision, which would take effect once the existing contracts expire in 2019, reverses years of policy implemented by the Obama administration and would revive a servicing model that had an equal number of benefits and problems.
[font size=1]-snip-[/font]
In April, Education Secretary Betsy DeVos withdrew a series of policy memos issued by the Obama administration to strengthen consumer protections for student loan borrowers. She rescinded three memos that, among other things, called for the creation of financial incentives for targeted outreach to people at great risk of defaulting on their loans, a baseline level of service for all borrowers and a contract flexible enough to penalize servicers for poor service.
[font size=1]-snip-[/font]
On Friday, Manning said that rescinding the Obama-era memos was necessary to simplify servicing and prevent cost overruns that the department would not have been able to afford. He said the new contract will ensure “superior customer service,” but he was short on details other than to say the reforms will streamline the payment process and borrowers’ interactions with the servicer.
A review of the amended contract solicitation shows the department plans to strip out mandates aimed at helping borrowers who fall behind on payments and people enrolled in income-driven plans. The servicer would no longer be required to have specialists on hand to aid people in delinquency, nor would the company have to remind borrowers to reenroll in income-driven repayment weeks before the deadline.
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Read more: https://www.washingtonpost.com/news/grade-point/wp/2017/05/19/betsy-devos-hits-hard-reset-on-student-loan-servicing-contracts/
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