Bills have been introduced in the House of Representatives and the Senate seeking to hold servicers of federal student loans more accountable for their actions and to further protect consumers from lower credit scores and other abuses.
The Student Loan Servicers Accountability Act of 2024 is being backed by Sen. Ron Wyden [D-Ore.] and Rep. Sara Jacobs [D-Calif.]. It seeks to amend the Higher Education Act to enhance vetting procedures for student loan servicers. This includes evaluating past performance, consumer satisfaction levels, and the ability to prevent errors and disruptions in services. The bill also mandates that servicers provide high-quality, personalized services, especially for borrowers at risk of default and delinquency.
One of the critical aspects of the legislation is its focus on protecting borrowers’ credit ratings. The bill requires servicers to place loans into administrative forbearance during periods of identified servicer error, ensuring that interest does not accrue during these times. Additionally, servicers must maintain borrower accounts for at least two years after the loan has been paid in full or transferred, preventing penalties due to servicer errors at the end of the borrower-servicer relationship.
Companies would also have to maintain borrower accounts for two years after loans have been paid off, assigned to collection, or transferred to another servicer in order to ensure that borrowers are not penalized for servicer errors that occur at the conclusion of the relationship.
“Higher education should be a gateway for Americans to advance their careers, support their families, and make a difference in their communities. It should not be an opportunity for loan servicers to mislead Americans and saddle them with skyrocketing debt,” Wyden said. “Our bill will make sure that servicers follow strict performance standards so that borrowers are not left in the dark. Let’s hold these predatory loan servicers responsible for fueling America’s student loan crisis.”
