The Department of Education on Friday announced that it has awarded contracts to six different companies that will be responsible for servicing and collecting federal student loans, while also announcing that it has amended the contract terms for those providers to strengthen “standards for performance, transparency, and accountability” that are aimed at protecting borrowers.
The contracts with Great Lakes, HESC/Edfinancial, MOHELA, Navient, Nelnet, and OSLA Servicing are scheduled to go into effect once a forbearance plan on student loans put in place at the start of the COVID-19 pandemic ends on Jan. 31, 2022.
“FSA is raising the bar for the level of service student loan borrowers will receive,” said FSA Chief Operating Officer Richard Cordray, in a statement. “Our actions come at a critical time as we help borrowers prepare for loan payments to resume early next year. The great work done by our negotiating team here enables us to ensure that loan servicers meet the tougher standards or face consequences.”
Companies that fall below certain performance standards will see the number of accounts placed with them lowered, according to the Education Department. Servicers will be measured on how effective they are at keeping individuals from falling behind on their student loans while also measuring:
- The percentage of borrowers who end a call before reaching a customer service representative by phone
- How well customer service representatives answer borrower questions and help them navigate repayment options
- Whether servicers process borrower requests accurately the first time
- The overall level of customer service provided to borrowers
Along with the new performance metrics, the six companies have all agreed to comply with federal, state, and local laws governing student loan servicing and collections and respond to complaints filed by those authorities in a timely manner.
The six companies will also be required to submit new, comprehensive reports that “give FSA greater insight into borrowers’ experiences with loan servicers,” while also allowing FSA to publish the data. FSA said it plans to release the performance metrics, as well as additional data points.
“We are pleased to see that in extending the contracts with the remaining federal student loan servicers, the Department of Education has taken some steps to provide improved service and accountability for student loan borrowers,” said Persis Yu, the director of National Consumer Law Center’s Student Loan Borrower Assistance Project, in a statement
