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.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|