Obama administration overhauls loan repayment system
The U.S. Department of Education plans to overhaul how it collects federal student loan payments from millions of Americans, according to Insidehighered.com.
Under the U.S. Department of Education’s new plan, federal loan borrowers will log onto a single Education Department web portal where they make payments on student loans. This means borrowers no longer have to find their way through multiple loan servicers’ sites. The contracted loan servicing companies will use Education Department branding instead of their own logos during all communication with borrowers.
At the present time, borrowers make payments to one of many servicing firms that work with the Education Department. The major loan servicers include Great Lakes Educational Loan Services, Inc, Nelnet, Navient, and the Pennsylvania Higher Education Assistance Agency (FedLoan Servicing).
The goal of the changes is to eliminate the need to know the name of the loan servicer, according to Under Secretary of Education, Ted Mitchell.
Mitchell also said another goal is to build a state-of-the-art loan-servicing program that creates guidelines and incentives to make the single loan management platform more user-friendly. In addition, all borrowers will receive one-on-one customer service.
In 2010, the Obama administration made all federal student loans originate from the Education Department. For years, this has caused criticism from student activists for not properly overseeing the companies it hired to collect student loans.
The loan services that will be a part of the new system will be announced in the upcoming month. There is a competitive government procurement process prior to the decision. Loan servicers are required to submit bids for the project by May 9.
The Director of Washington, D.C., office of the Institute for College Access and Success, Jennifer Wang, feels the changes are a really important step. She said it should not matter who your servicer is – borrows should have consistent information.
These changes seem long overdue. I think borrowers will really appreciate the simplicity of logging on to a single portal to make loan payments.