Department of Education Wants Better Treatment for Student Loan Holders
Posted By Eliana Osborn on July 28, 2016 at 1:58 pm
Most students have no control over the company servicing their loan. Unlike regular life, there’s no incentive for good communication or friendly associates in the student loan industry. Customers naturally flow to approved providers. That explains some of the reasons these companies are not known for their stellar customer interactions.
Without overhauling the whole federal student loan system, the Department of Education is trying some small changes to see if it can improve how loan servicers treat students. This follows recent policy shifts that require better transparency from servicers about how to modify repayment plans or discharge debts.
Much of the Obama administration’s work on higher education has involved student protections, including the Student Aid Bill of Rights. That means an ability to compare costs and other data, as well as having options for dealing with student loan problems. The announcement this month detailing additional standards for loan servicers is a continuation of this trend.
Changes for student loans pushed by the DOE
Five areas of student loans are addressed with the new DOE memo. These will be important in recertifying current loan servicers as well as allowing new ones into the system.
- Economic incentives for loan holders who avoid default and stay on track to repayment.
- Accurate information about options, legal issues, and how to get help.
- Consistency in communication to avoid confusion.
- Accountability for responding to students as well as how complaints are handled.
- Transparency in data about how servicers are managing accounts.
These may seem like basic tenets of reasonable customer service. But too often student loan servicers have not worked with their loan holders, assuming an adversarial relationship. The Department of Education press office explains, “Ultimately, the new loan servicing system will make it easier for borrowers to manage and repay their loans. This will mean that any borrower can log into a single web portal to access information, make payments, apply for benefits, and manage their account. In the future, multiple loan servicing vendors or customer service providers will plug into the platform.”
Tweaks could help with student loan repayment
Loan servicers are being asked to step up their efforts to make loan repayment straightforward. This is a trillion dollar industry with no signs of slowing down. Critics say standardization of the repayment process—not just applying for a loan in the first place—is overdue.
The ecosystem or online portal DOE is creating for student loan servicing isn’t up and running yet. Getting companies better aligned to standards of customer service and accountability is a first step. With committed implementation, moving into a single interface will be a much easier proposition than it is now. Many students end up with loans from multiple servicers; streamlining these disparate entities will only help more borrowers handle their debts appropriately.