One Vendor to Monitor Student Loans

The number of companies servicing federal student loans will soon be trimmed. The move that was suggested by president Trump has raised concerns among consumer advocates.

Many believe that granting the work of servicing student loans to just one company, as opposed to the current roster of nine, would create a monopoly with too much power. Moreover, customer service is expected to worsen under such a monopoly.

The Secretary of Education, however, has a differing opinion. Betsy DeVos affirms that if the government is less involved in student loans, this allows for better monitoring of the selected vendor’s service.

The Department of Education is the largest issuer of student federal loans, having issued more than $1 trillion and $1.4 trillion outstanding. Student loan borrowers will, however, deal with the 9 companies outsourced from this Department if they want to modify their loans.

Other duties of these private companies are to handle payment, collections, payment deferment and responding to general queries from customers.

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What Borrowers Can Expect in These Changes bankruptcy

Just like any other type of loans, learning more about the student loan terms is vital. These changes will affect borrowers of student loans in these ways:

  • The Department of Education will grant the loan servicing work to one vendor after reviewing bids from the list of allowed companies.
  • Four of the nine companies will bid for the contract.
  • The selected vendor will have a new system which will include a new website and an updated payment processing mechanism. All this should be in place within 18 months of winning the contract.

The four companies who are expected to bid for the contract include Navient, Great Lakes Educational Loan Service, Nelnet and FedLoan Servicing.

If your student loan is serviced by the winning bidder, you will likely be familiar with the look and feel of the new website.

However, if you are dealing with the other companies not chosen for the contract, you will expect a different way of doing business, in terms of using a new website, and an updated list of customer service numbers.

Consumer Advocates Take on The Proposed Student Loan Changes

Although the outcome is yet to be seen, advocates agree that the current student loan system needs improvement. According to a statement from American Student Assistance, the high levels of delinquencies and defaults is evidence that the student loan system calls for improvement.

However, the fact that Trump’s model might create a dominating monopoly with no competitive incentives to provide high-quality service is a legitimate concern.

Why is DeVos Changing to One Vendor?

Actually, the streamlining process for student loans dates back to the Obama administration. The initial idea was to cut the student loan vendor list to four companies but now Trump wants to cut it even more.

DeVos says it is difficult to monitor nine student loan service providers and so dealing with one company will lessen this work. It will also provide a “common and consistent experience for all customers and eliminate the confusion stemming from multiple companies”.

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