New Rules Will Create a Monopoly for a Single Servicer and Eliminate Requirements for Several Important Services
WASHINGTON, D.C. - Today, the Center for Responsible Lending (CRL) expressed concern that new requirements released by the U.S. Department of Education in its contract solicitation for a future loan servicer will narrow the nation’s student loan servicers from nine to a single servicer, essentially creating a monopoly over management of a $1.3 trillion loan portfolio.
The requirements also eliminate several services that the former administration had expected of student loan servicers in the past, including:
- The high-touch servicing program, which targets student borrowers at greater risk for default and gives them increased contact with the servicer;
- Providing student borrowers with the Payback Playbook, a guide on how to make informed choices about paying back loans on time;
- Providing student borrowers a Spanish-language option for information from the loan servicer.
“While decreasing the number of student loan servicers may simplify the system, reducing them to just one is asking for trouble,” said CRL Policy Counsel Whitney Barkley-Denney. “If you have a servicer like Navient, which has a record of serious abuses and has stated on the record that it works in the interests of the lenders and not the borrowers, you’re creating a nightmare scenario. How do you effectively rein in those abuses when the servicer knows the borrowers have nowhere else to go?”
Navient, formerly Sallie Mae, is the nation’s largest servicer of student loans. The Consumer Financial Protection Bureau filed a suit against it in January for cheating borrowers out of their right to income-based repayment plans and other abuses.
“Putting the high-touch servicing program, the Payback Playbook and the Spanish-language option on the chopping block contradicts this administration’s assertions that it has the interests of students in mind,” continued Barkley-Denney. “Navient has already shown its willingness to leave struggling borrowers behind; giving them or any servicer a pass on this will just make it easier to do so in the future. And that Spanish language option can be essential for some borrowers to navigate a complicated system, especially those in the Parent Plus Loan program, who might not be fluent in English.”
CRL is pleased the requirements still require that servicers be in compliance with state laws. California and Connecticut have recently enacted legislation overseeing student loan servicers in their states, and Maine has positive pending legislation awaiting the signature of the Governor.
For more information, or to arrange an interview with a CRL spokesperson on this issue, please contact Carol Hammerstein at email@example.com or 919-313-8502.