The Department of Education has announced a new plan to hold student loan servicers accountable for not harming individuals with stiff penalties that the department has already shown it is willing to put into practice.
What’s Happening: Individuals with student loans started making payments again recently for the first time since the start of the COVID-19 pandemic. As part of its plan to reduce student loan debt and make the process of repaying loans as easy as possible, the Education Department, under the direction of the Biden Administration, has taken a number of steps. This newest step is increased oversight of servicers and holding them more accountable when something goes wrong. They have already withheld $7 million in payments because a servicer failed to send statements in a timely manner to borrowers.
- The Federal Student Aid unit will listen to and score interactions between servicers and borrowers and conduct secret shopper calls to measure the accuracy of answers to specific questions.
- It will also partner with other federal and state regulators to enforce consumer protection laws.
What Could Happen: If an issue with the performance of a service is detected, the department may take one of the following steps:
- Withholding payment
- Suspending the allocation of new borrowers to the servicer or re-allocating borrowers to a different servicer
- Update reports that are used to determine the awarding of future contracts
The Last Word: From Education Secretary Miguel Cardona: “Today’s announcement should send a clear message to all our contracted student loan servicers that the Department will use the full scope of our oversight and accountability tools to ensure borrowers get the level of service they deserve. As the Biden-Harris team works to fix our country’s broken student loan system, we will continue to put the needs of borrowers first and do whatever it takes to support Americans’ success as they return to repayment.”
