The US Department of Education has introduced a series of protections and customer service standards in an effort to implement a new vision for student loan servicing that hopes to make sure the more than 40 million individuals in the country who hold student loan debt receive high-quality customer service and fair treatment during the repayment process.
US Under Secretary of Education Ted Mitchell outlined the policies, developed with the help of the US Department of the Treasury and the Consumer Financial Protection Bureau, in a memorandum to Federal Student Aid (FSA), which will work to improve student loan servicing during the procurement process.
"Today's policy directive is a big win for tens of millions of borrowers," said U.S. Secretary of Education John B. King Jr. "It will help ensure that student loan borrowers get the service they deserve."
Although most students who take out federal student loans are able to successfully repay them, many borrowers are continuing to struggle with their obligations or are in danger of defaulting. The Obama Administration has made continuous efforts to make college affordable and help borrowers manage their debt, and part of that effort includes the Student Aid Bill of Rights, introduced in 2015, that requires federal agencies to combine their efforts on a number of actions meant to help borrowers manage their debt.
"This guidance has the power to strengthen our student loan financing system by providing long-overdue improvements to servicing," said Treasury Deputy Secretary Sarah Bloom Raskin. "I commend the Department of Education on this effort and urge Federal Student Aid to move forward aggressively with implementation."
The memo will build on the efforts of these agencies and work to identify and incorporate student loan best practices. The joint endeavor will offer direction to the Department in five areas, including economic incentives, accurate and actionable information, consistency, accountability, and transparency.
According to the memo, the FSA will include incentives that push servicers to help borrowers keep on top of their loans and avoid default while also avoiding fixed-fee structures. In addition, basic, accurate information must be included concerning account features, borrower protections, and loan terms. The memo continues to discuss consistency, saying communications to borrowers must be adequate, timely, and consistent, using only US Department of Education-branded communications. In addition, it says the website and printed materials should share a consistent look in order to avoid confusion for borrowers.
In terms of accountability, the memo says borrowers should be able to expect a high-level of accountability in their federal student loan servicers, ensuring quick responses to inquiries and complaints, as well as clear resolutions to any issues that arise. Lastly, information should be made publicly available concerning the tracking and reporting of requests for assistance, escalations, and appeals to improve accountability.
The new loan servicing system is meant to make the management and repayment of loans easier for borrowers. Borrowers will have the ability to log into a single web portal that will allow users to find pertinent information, make payments, apply for benefits, and manage their accounts. Future plans include the ability for several loan service vendors or customer service providers to plug into the platform.