Why DeVos’ Plan to Cut Student Loan Servicers From 9 to 1 Matters to You
The Trump administration wants to reduce the number of federal student loan servicers from nine to one, according to a statement released by the Department of Education on May 18.
The change will reportedly save taxpayers more than $130 million over the next five years, but critics are concerned that having a single student loan servicer will create a monopoly that harms borrowers.
One Student Loan Servicer to Rule Them All?
Student loan servicers will bid for a new contract that will start when current contracts expire in 2019.
Many say having nine student loan servicers — Telnet, Navient and Great Lakes are some of the most familiar names — is cumbersome.
Under the current system, loans can be transferred to another servicer, forcing the borrower to create a new login, learn to navigate a new online payment system and get to know the servicer’s customer service procedures.
“Borrowers can expect to see a more user-friendly loan servicing interface, shorter email and call response times and an improved payment application method that will maximize the benefit of each payment the borrower makes,” U.S. Secretary of Education Betsy DeVos said in a statement.
Is Simpler Better for Student Loan Servicing?
Trump’s Department of Education is focused on streamlining student loan payment processes, but some worry it may be oversimplifying the entire operation.
The amended contract solicitation will not require the winning loan servicer to provide information in Spanish, nor will it require the servicer to host online calculators for borrowers to monitor their repayment status, “Diverse: Issues in Higher Education” reports.
“With zero competition, we are concerned about a ‘too big to fail’ student loan company that has zero incentive to work for students, borrowers, and their families,” Natalia Abrams, director of advocacy group Student Debt Crisis, told U.S. News and World Report.
This isn’t the only change to the student loan world the Trump administration has made. In late April, DeVos rolled back two mandates from the Obama administration that were intended to make the collections process more transparent for borrowers and penalize student loan servicers that received complaints about customer service.
Lisa Rowan is a writer and producer at The Penny Hoarder.