In March 2015, President Barack Obama made a pledge to students and student loan borrowers in the form of the Student Aid Bill of Rights. In addition to promising easier access to higher education and the means to pay for it, the pledge resolved to allow all borrowers to receive “quality customer service, reliable information, and fair treatment as they repay their loans.” Last week, the Department of Education issued a playbook of sorts of how it intends to fulfill this objective.
Over the last few years, the Department of Education and the Consumer Financial Protection Bureau have collected complaints and other feedback from borrowers, members of the student loan industry and consumer advocates. One of the most frequent complaints was about borrowers’ confusion when their loans were held by multiple servicers, who may have differing policies or procedures.
In response, in 2014, the department asked how the current platform of 11 different servicers could better respond to the 40 million student loan borrowers. The answer? Just have one servicer.
As a result, the department is choosing a single servicer, who will create a student loan servicing “ecosystem” that is intended to be the single point of contact and managing system for all federally held student loans. There will still be multiple servicers, but that should be invisible to borrowers. That was the first step.
Step 2 appears to be the new directive describing how this future “ecosystem” should respond to student loan borrowers and their needs. These rules should be implemented immediately within the new system, but may require regulatory or statutory action for those federal loans not directly held by the department, such as the Federal Family Education Loan Program and Perkins loans. Below are some of the highlights of what borrowers can expect.
[Prepare to ask these three questions before refinancing student loans.]
— A single web portal for all federally held loans and a standard communication format branded with the Department of Education logo. Borrowers will no longer need to know the name of their servicer to manage their loans.
— Standard customer service practices to ensure a “consistent customer experience.”
— More oversight, accountability and transparency of all student loan service providers, and greater incentive for providers to keep borrowers current on their payments and assist those at high risk for delinquency and default.
— Specially trained personnel to assist high-risk borrowers and those in the military.
— Proactive communication to ensure borrowers on income-driven plans are aware when it’s time to recertify their plan and help them if their applications are incomplete.
— Increased call center hours, account access and payment methods, including the use of mobile technology.
— Larger payments than due that are submitted without instructions will have the excess applied in a way that saves borrowers the most money. Borrowers will also be able to go online to provide instructions on how to allocate extra payments. Payments may be reallocated retroactively if requested.
— Payments less than what is due will be applied in the way that keeps the most loans current.
— Increased access to detailed account information.
— Servicers will develop a “comprehensive complaint resolution plan” that dovetails with the department’s own recently launched feedback system. Complaints will be handled consistently and in a timely manner. Borrowers should expect acknowledgment of their complaint within 15 days and resolution within 60 days.
[Learn the five steps to file a student loan complaint.]
— The department will receive all complaint information — as will the Federal Trade Commission’s Consumer Sentinel system. This system is accessible by agencies such as the Department of Veterans Affairs, the Consumer Financial Protection Bureau and the Department of Defense.
— The department will publicize data, including: servicer performance; loan portfolio characteristics; average phone – answering time; number of disputes and the percentage of those resolved in favor of the borrower; account characteristics including borrower status, payment methods and payment plan choice; and characteristics of defaulted borrowers.
While many servicers already offer this level of service, not all borrowers have had this experience. The Department of Education’s goal is to increase consistency, accuracy, accountability and transparency for the whole federal student loan system.
The Student Loan Ranger applauds this initiative. Student loans can be a heavy burden for some borrowers — how their loans are managed shouldn’t be part of that burden.
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Changes Coming to Student Loan Servicing originally appeared on usnews.com
