9.8 million student loan borrowers will have switched services by 2022


The Department of Education’s federal student aid office on Friday announced a set of stricter standards for student loan services, the companies the government pays to oversee billing and collection of student loans. Payments.

“The FSA is raising the bar for the level of service that student loan borrowers will receive,” FSA chief operating officer Richard Cordray said in a statement. “Our actions come at a critical time as we help borrowers prepare for the resumption of loan repayments early next year. The excellent work done by our negotiating team here allows us to ensure that services loans meet or suffer the consequences. “

In the past, service officers have been accused of harassing borrowers, misleading borrowers about their options, mismanaging the civil service loan cancellation program, and poor customer service.

The new changes are intended to “ensure a smooth transition for borrowers out of the student loan hiatus ending Jan. 31, 2022” and also come in a significant reshuffle among service providers.

By the end of the year, nearly 10 million borrowers will see their student loans go from one service to another. Millions more could suffer the same fate over the next few years.

“In a perfect world, these transitions would be seamless for the borrower, but they might not be,” says Kevin Walker, editor of CollegeFinance.com. “And borrowers should therefore be careful to ensure that through no fault of their own they do not miss payments.”

Service agent mix

On July 8, the Pennsylvania Higher Education Assistance Agency (often referred to as FedLoan) announced that it would not be renewing its contract with the federal government. FedLoan oversees the loans of 8.5 million student borrowers, which have been or will be transferred to another provider by the end of the year.

Jason DiLorenzo, founder and CEO of PSLFJobs, a consultant for employers and an employment platform, said the announcement was “good news”.

“FedLoan has been a notoriously error-ridden experience for a lot of people: poor customer service and regular mistakes,” he told CNBC Make It. “The people we spoke to at FedLoan made a commitment to [the transition] go smoothly. But they’re the ones leaving, so I’m more worried that they’re doing it right than the new officers taking over. “

Less than two weeks after FedLoan’s announcement, another student loan manager, Granite State Management & Resources, also announced that it would not extend its contract with the Department of Education when it expires on December 31. The manager manages approximately 1.3 million borrower accounts which will be transferred.

The announcements mean that some 9.8 million student loan borrowers – nearly 23% of the country’s 42.9 million total borrowers – will see their loans change hands.

And millions more borrowers could be in a similar boat in the near future.

In September, Navient, the country’s second-largest student loan manager, asked the education ministry to transfer the accounts of the 6 million borrowers it oversees to another manager called Maximus.

However, in the FSA’s Friday announcement, it was revealed that the Education Ministry had offered Navient to continue handling loans until 2023 and is “currently reviewing” Navient’s application. If approved, Navient’s borrowers can also be transferred, albeit on a less rushed timeline, which DiLorenzo said “alleviates concerns about a brutal transfer that could lead to administrative problems.”

New service standards

The new FSA standards say that in the new year, federal loan managers will be evaluated on their effectiveness in preventing borrowers from falling behind on their payments and through customer service measures, including the percentage of borrowers who end a call before reaching a customer service representative over the phone, and whether the services are handling borrower requests accurately the first time.

“Student loan managers will now have strong financial incentives to provide quality service to their clients,” the ad read, referring to contract renewals. “When the new contract terms come into effect, the FSA will also require providers to maintain call center hours, including Saturdays, in order to make customer service representatives more accessible to borrowers. Customer Service Representatives. “

Going forward, student loan manager contracts “expressly prohibit loan managers from protecting themselves from lawsuits to hold companies accountable in court for poor management practices.”

“There will definitely be issues with a big serve or a change like this,” said DiLorenzo. “But I think at the end of the day people are going to be better off.”

Don’t miss:

Source link

Leave A Reply

Your email address will not be published.