Remember all that buzz about how federal student loans were going to be streamlined to a single servicer? Well, whether you were for or against the idea, you no longer have to worry about it.
This week, amid bipartisan opposition, the Department of Education (DOE) retracted its plan to create a single student loan servicer.
Here’s what you need to know about the DOE’s latest proposal — as well as how you can take better control of your student loans.
What was Betsy DeVos’ single student loan servicer plan?
Back in May, Education Secretary Betsy DeVos unveiled her plan to allow a single student loan servicer to manage federal student loans. In total, around 44 million borrowers are carrying $1.4 trillion in student debt.
Her plan would have been a streamlined alternative, she said, to the nine different companies that currently service federal student loans.
The problem? Many believed her plan would reduce competition and give too much control to one company.
“The Department’s plan to select a single servicer for the entire Direct Loan portfolio is extremely alarming,” wrote members of Congress in a June 12 letter to the DOE.
“This decision could create a monopolistic, unresponsive, and inflexible student loan system that would produce poorer results for both borrowers and taxpayers. The single servicer, responsible for administering a growing trillion-dollar loan portfolio, would increasingly become ‘too big to fail.’”
DeVos’ plan blocked by bipartisan opposition
In opposition to DeVos’ plan, Senators Roy Blunt, R-Mo., Elizabeth Warren, D-Mass., James Lankford, R-Okla., and Jeanne Shaheen, D-N.H., introduced the Student Loan Servicer Performance Accountability Act on July 31.
The bill’s goals are to promote competition and prohibit the creation of a “federal student loan monopoly.”
“Maintaining choice and competition amongst student loan servicers is the best way to ensure they will continue improving services for student borrowers,” said Sen. Blunt in a statement. “This bill will strengthen the performance-based incentives we have now, and prevent any one student loan servicer from becoming so large it poses a risk to taxpayers.”
The day following the bill’s introduction, the DOE announced a new plan: a single online platform — rather than a single servicer — for all student loan information.
The platform, DeVos said in a press release, will “leverage new technology” and “modernize” Federal Student Aid (FSA), which is a resource for current and future student loan borrowers.
“When FSA customers transition to the new processing and servicing environment in 2019, they will find a customer support system that is as capable as any in the private sector,” added Dr. A. Wayne Johnson, the head of FSA.
The DOE, according to POLITICO, said the announcement wasn’t in response to the Student Loan Servicer Performance Accountability Act — and that the changes had “been under consideration” since June.
But those involved in the bill considered it a big win:
“Today @usedgov announced it will reverse its single loan servicer plan – & I’m glad that they’re changing course,” tweeted Sen. Warren on Aug. 1. “Congress should pass our student loan servicer bill to ensure @usedgov never heads in the wrong direction again.”
How to better manage your student loans today
Are you a borrower with a dizzying array of student loans?
This news means you won’t see any changes soon — but hopefully things will get better when the new online platform is introduced in 2019.
In the meantime, here are a few steps you can take to simplify your loan life:
- Sign up for our student loan dashboard, which makes it easy to see all of your loans and servicers in one place.
- If your loan servicer is terrible, consider working with a student loan ombudsman, refinancing your loans, or filing a complaint.
- Contact your representatives to tell them how you feel about the new student loan servicing bill. If it’s your first time reaching out, try the Countable app.
Managing student loans is a confusing — and oftentimes miserable — process. Until changes are enacted, it’s essential you take control of your loans yourself.
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