9.8 million student loan borrowers will have servicer switched by 2022
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The Federal Student Aid office of the Department of Education announced Friday a tighter set of standards regarding student loan servicers. These are the businesses that the government uses to monitor the collection and billing of student loans. Payouts
Richard Cordray (FSA Chief Operating Officer) stated that FSA has raised the standard of student loan service. We are helping borrowers get ready for the start of next year’s loan repayments. Our actions arrive at an important time. We can rely on the great work of our negotiation team to make sure that lenders meet tougher standards and do not face any consequences.
Servicers were once a common practice in the past. been accused Of harassing borrowers misleading borrowers about their options mismanaging the public service loan forgiveness programAnd poor customer service
They are designed to ensure a smooth transition of borrowers out the student loan pause that ends on January 31, 2022, and come amid significant reshufflement among servicers.
Nearly 10 million student loan borrowers could have their loans transferred from one servicer by the end of this year. In the future, many more students could be facing the same fate.
Kevin Walker is the publisher of CollegeFinance.com. He says, “In a perfect universe, these transitions wouldn’t be difficult for the borrower.” The borrowers must pay close attention so that payments are not missed.
Servicer shuffling
On July 8.Federal government contract not renewed by Pennsylvania Higher Education Assistance Agency, commonly known as FedLoan. FedLoan is responsible for the loan portfolio of over 8.5 million student borrowers. These loans have already been transferred or will be to another servicer before the end of this year.
Jason DiLorenzo is the founder and CEO at PSLFJobs. He says that this announcement is good news.
He tells CNBC Make It that FedLoan is notoriously fraught with errors for many people. “FedLoan was a notoriously flawed experience for a lot, including poor customer service and frequent mistakes.” FedLoan employees are dedicated to making it a great experience. [the transition] happen smoothly. They’re leaving so they are more concerned about their performance than me.
Less than two weeks after FedLoan’s announcement, another student loan servicer, Granite State Management & Resources, also announced that it would not extend its contract with the Department of Education when it expires Dec. 31. It will transfer approximately 1.3million borrower accounts.
The announcements mean some 9.8 million student loan borrowers — nearly 23% of the country’s 42.9 million total borrowers — will have their loans change hands.
Millions more may find themselves in similar situations in the not too distant future.
In SeptemberNavient, which is the nation’s second largest student loan provider, requested that the Department of Education transfer accounts of 6 million borrowers to Maximus.
FSA made it clear that Navient had been offered an extension by the Department of Education for servicing its loans up to 2023. They are “currently reviewing” Navients request. Navient’s borrowers could also be transferred if approved. albeit on a less-rushed timelineDiLorenzo said that the aforementioned “allays concerns surrounding an abrupt transfer that could cause administrative problems.”
New servicer standards
FSA’s revised standards state that federal loan servicers in 2019 will be judged on whether they are effective at keeping borrowers out of debt and by customer service metrics such as how many borrowers end calls without reaching a representative and whether the servicers correctly process borrower inquiries.
The announcement refers to contract renewals and states that student loan servicers now have financial incentives to offer quality customer service. FSA will require that servicers maintain the core call center hours on Saturdays when new terms come into effect. This is to ensure that borrowers have access to customer service representatives whenever possible. FSA also requires loan servicers increase their Spanish-speaking customers service reps.
Student loan servicer agreements will now “expressly forbid loan servicers” from being sued in the event of poor service practices.
DiLorenzo admits that there are certain bumps when you do a large service or make a change. But I believe that people will be better off if they do.
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