Federal Student Loan Servicer Reforms
Good news guys – it’s about to get easier to deal with your student loan debt.
The Department of Education is finally going to realize the promises made by President Obama’s Student Aid Bill of Rights, and things are going to get better for people looking to take on student loans, as well as for those of us who are struggling to pay them back.
Why Is the Government Changing Student Loan Servicing?
The Department of Education (DOE) and Consumer Financial Protection Bureau (CFPB) have been inundated with complaints regarding student loan servicing companies, including all sorts of concerns regarding obstinacy, mismanagement, and even outright fraud in some cases, and there appears to be a glimmer of hope that things may be about to get much better.
One of the biggest problems people face when struggling to deal with their student loan debt occurs when someone has a loan that’s being held by more than one loan servicer, each of which requires different things, has different policies and wants different procedures for certain types of activity (like applying for Federal Student Loan Forgiveness benefits, or applying for a Loan Deferment or Forbearance).
Solution 1: Consolidate All Servicers Into a Single Entity
In response to this obvious problem of dealing with several loan servicers, the DOE is looking to consolidate all loan servicers into a single entity, who’s going to be responsible for building a new “ecosystem” that will serve as the single source for all communications, applications, management and services regarding Federal student loan debt.
And while this may sound a little scary (absolute power corrupts absolutely), I’m holding out hope that they will get this system right, and that we’ll all find it easier to deal with the complicated processes required to take advantage of Federal benefits programs, apply for forgiveness, receive financial assistance, get answers to questions, etc.
Solution 2: Make Everything Easier for Borrowers
Once the actual servicing process has been consolidated to a single entity, the next step in improving the student loan servicing experience will be to set new policies and processes for that entity, focusing on making things easier for borrowers.
And while that may not mean actual financial assistance (in the forms we all want, like by offering more forgiveness, refinancing options, etc.), it’ll at least make things more convenient for those of us actively managing our student loan debt.
Here are some of the changes that the DOE is promising to make as part of the newly designed “ecosystem”:
Create a Single Website for All Loan Issues
Currently, you have to remember who is servicing your loans, and you may need to go to different websites to deal with certain issues related to your Federal student loan debt.
For the organized individual, this may be no problem, but it’s obvious that many people are not good at remembering complicated details (like lists of usernames, passwords, websites, etc.), and so this consolidation into a single web entity is sure to make things easier for a large percentage of the borrowing population.
A “Consistent Customer Experience
This is an obvious outgrowth of consolidating several loan servicers into a single entity, since that one entity is sure to have set policies for handling questions, answering emails, taking phone calls, etc., and it’s also a great step in the right direction.
Currently, your loan servicer holds all the cards when it comes to dealing with your student loan debt, and if they’ve got a bad customer service experience (due to outsourcing phone banks to other countries, being slow to responds to emails, hiring service people who hardly understand student loans, etc.), then it’s likely that borrowers will experience frustration when attempting to actually DEAL with their loans.
Once all loans have been consolidated to a single servicer, at least you’ll be assured a consistent experience whenever you need to do something, like switching to a new Student Loan Repayment Plan, or asking questions about eligibility rules for Nursing Student Loan Forgiveness Benefits.
Better Oversight of Service Providers
By consolidating all servicers into a single entity, the DOE will have a much easier time watching over the people servicing their loans, and ensuring that they’re doing a good job when it comes to interacting with their customers (you, the borrower).
The DOE will also be able to more easily ensure that the service provider is being held accountable for their behaviors, and being transparent about their policies and procedures, which means that they won’t be able to get away with things like denying benefits, lying to consumers and obstructing the path to forgiveness or other federal financial assistance programs.
Highly-Trained Specialists to Assist with High-Risk Borrowers
One of the biggest problems with Federal student loan debt is that certain segments of the population (poor people, military personnel, etc.) have a much tougher time handling their student loan debt than others, and this consolidation process should improve things for those people who struggle to avoid Defaulting on Student Loans.
With a single loan servicer should come special training procedures and entire departments who focus specifically on dealing with complicated situations, like Military Student Loan Forgiveness Benefits, which are notoriously difficult to actually USE!
Better Communications For All Borrowers
This is especially important for anyone on Income-Driven Student Loan Repayment Plans, like the Pay As You Earn Plan, or the REPAYE Plan, which require annual certification processes to ensure that your monthly payments keep counting toward the 120/240 payments threshold required to receive Federal Student Loan Forgiveness.
A single servicer can more easily set up communications reminders and structure their teams to be proactive about getting information to the borrowers, like whenever student loan laws change, when new relief programs are introduced, or when new payment plans are released to a wider portion of the population.
The single loan servicer is going to need a huge staff, and as a larger entity, they should be able to offer expanded hours, meaning more than the typical 9-5, potential coverage on weekends and holidays, and additional communications avenues, perhaps offering not just phone calls and emails, but also live chat, or even in-person centers where borrowers can speak to a human being face to face!
Again, the larger business should be able to better service customers because it has a bigger footprint, meaning that when you do have a problem, it’ll be easier to get in touch with somebody at the servicer who can help.
New Payment Methods
The current distributed loan servicer system means that some companies may allow you to pay only via check, while others may take cash or check or electronic transfer, but do any loan servicers currently let you pay with PayPal? Bitcoin?
In the new system, it’s possible that we’ll see expanded payment options… like mobile payments via Apple Pay, Venmo, or Google Wallet. And again, all this expanded accessibility means good things for you, because it’ll give you additional options to deal with Paying Off Your Student Loans.
With a single servicer, and an obviously much larger network, comes the need for a better website with more accessible data, making it easier to log in and check on the status of your loans, payments, etc.
Being able to login quickly and deal with making a payment, as opposed to being forced to send out snail mail, get in a waiting line for a call center representative, etc., is going to make for a much nicer experience than the current system offers.
Better Financial Assistance
Part of the DOE’s requirement for the new loan servicer is that they’ll have to be able to deal with all sorts of payments, including payments that are too large, as well as those that are too little.
Under the current system, each loan servicer has their own set process for handling overpayment and underpayment, with some servicers making it not that big a deal, while others can immediately send a loan into default.
The new system is going to require that payments larger than the amount due will have the money applied to the debt in a way that maximizes value to the borrower (paying off actual principal, instead of applying it to interest, for example).
In addition, the new loan servicer is going to have to structure their system to allow payments for less than the amount due to be applied in a way that helps keep the loan current (avoiding sending it into Default status), which is great for those of us having trouble keeping up with our current payments.
A Complaint Resolution Center
Probably the most “feel-good” item on the list, it’s still one that I think is important because there hasn’t been much accountability for loan servicers in the past.
They’ve been able to scam, weasel and swindle loan borrowers for years now, without ever having to face a massive groundswell or movement of complaints because of the decentralized system, but that’s all set to change when a single servicer takes responsibility for all outstanding Federal debt.
With the single servicer model comes a single complaint system, which will be run by the Federal Trade Commission’s Consumer Sentinel system, which connects to the Department of Veterans Affairs, the Consumer Financial Protection Bureau and even the Department of Defense.
Forget about resorting to Yelp and Better Business Bureau reviews, because you’ll be able to leave scathing complaints for the loan servicer in a single, centralized location, where everyone can see it.
The DOE is going to publicize important performance statistics from the new loan servicer, including things like:
- Characteristics of the loan portfolio (average amount, interest rate, etc.)
- Average time to answer a phone call, or an email
- Number of complaints/disputes
- Percentage of disputes the borrower wins
- Borrower status
- Popular Payment methods
- Popular payment plans
Will these stats make a significant difference in helping you pay back your loans? No, they certainly won’t.
But… they will make you feel better about doing it, knowing that the loan servicer is being held accountable for their bad behavior.
My Thoughts on These ChangesFor More Information
If you have other questions about the changes coming to the student loan debt servicing industry, or about dealing with your own student loan debt, please feel free to post a comment below, and I’ll do my best to answer you question within 24-48 hours.
Whether you’re wondering if you’re eligible for the Public Service Loan Forgiveness Program, or you need more information about the differences between available Student Loan Repayment Plans, ask away and I’ll get you a response.
For Professional Assistance
Alternatively, if you need an immediate response, please give my friends at the Student Loan Relief Helpline a call.
The Student Loan Relief Helpline is a private, for-profit company that can help you better understand and deal with your student loan debt.
While their services do cost money, the phone call is free and many of my visitors have been able to get free assistance with things like finding out what forgiveness benefits they qualify for, or determining which repayment plan will work best for them.
You can reach the Student Loan Helpline by calling: 1-888-694-8235.