The Department of Education has unveiled a new set of guidelines that detail how student loans will be serviced and collected going forward. The policies were developed in consultation with the Consumer Financial Protection Bureau and the Treasury Department.
A detailed overview of the new guidelines is available here.
The guidelines will also be used by the Education Department when awarding contracts to companies that will service and collect student loans guaranteed by the federal government. Among the new changes are:
- Economic Incentives: Economic incentives play a critical role in how well a servicing system serves borrowers. The memo directs FSA to include incentives that encourage servicers to help borrowers stay on top of their loans and avoid default while avoiding fixed-fee structures that create a disincentive to help struggling borrowers.
- Accurate and Actionable Information: Student loan borrowers depend on servicers to provide basic accurate information about account features, borrower protections, and loan terms. The memo directs key improvements to oral and written communications with borrowers – especially those borrowers who are at the highest risk of default.
- Consistency: Borrowers should receive adequate, timely, and consistent communications. The memo directs FSA to use only U.S. Department of Education-branded communications and to create web pages and printed materials that have the same look and feel to eliminate confusion for borrowers. It also sets forth a common set of servicing practices designed to assist borrowers in managing their student loans.
- Accountability: Borrowers must be able to expect a high level of accountability in their federal student loan servicing experience including quick responses to inquiries and complaints, and transparent resolutions when problems occur. The memo directs FSA to step up monitoring of servicing vendors and to integrate complaint resolution into the oversight of those vendors.
- Transparency: The memo details the expectation for better federal student loan data transparency and publicly available information on the tracking and reporting of requests for assistance, escalations, and appeals to improve accountability for loan servicing performance.
The Education Department also announced plans to build and maintain a single platform for all federally guaranteed student loans.