//Congress Takes Hard Look at Student Loan Servicers

Congress Takes Hard Look at Student Loan Servicers

The House subcommittee in charge of education took a look at the shortcomings of the student loan servicing system Wednesday, with the focus on a critical report from a key government watchdog and concerns over delays to long-planned reforms.

In the subcommittee’s first hearing on student loans since the Democrats took control of the chamber this year, Chairwoman Rosa DeLauro (D-Conn.) said the Department of Education (DoED) had been “asleep at the wheel,” and that in addition to the national student debt crisis, the country is also suffering from a “servicing crisis.”

The top of the agenda involved the department inspector general’s report, issued last month, that said the Federal Student Aid office had been lax in policing student loan servicers. As a result, the report said, servicers had too frequently failed to inform borrowers about all of their repayment options and miscalculated payments in Income-Driven Repayment plans, among other issues.

In testimony to the subcommittee, Assistant DoED Inspector General Bryon Gordon said Federal Student Aid had found servicers to be “noncompliant” 61% of the time when monitored in 2015-17, yet it hadn’t done enough to track these issues or hold the servicers accountable.

The lawmakers also discussed long-standing ambitions to reform student loan servicing under a new Next Generation Financial Services Environment, commonly known as “NextGen.”

NextGen would combine the current system of nine federal student loan servicers into a single platform, and Gordon said Federal Student Aid believed this would “put them in a position to address some of the issues” in the report.

But the NextGen plan has been slow in coming. The DoED had said in 2017 they hoped to roll out the system this year, but Gordon told the subcommittee that “they’re still early on in the planning for that.”

However, Colleen Campbell, the director of postsecondary education at the Center for American Progress, was more explicit.

“That [NextGen-building] process has been going on for years now and will continue to be delayed, I’m sure, if servicers and debt collectors have any say in it,” she told the subcommittee. “We can’t wait for these changes. They have to happen now, and you can compel the Department of Education to do them right at this moment.”

Next steps

Despite the problems with the current system outlined during the hearing, know that you have ways to push back if you feel your servicer has misled you or failed to inform you about your federal student loan options.

If any of these situations apply to you, or if you believe you’re paying more than you should be, you can file a complaint with the Consumer Financial Protection Bureau (CFPB). Although the CFPB has come under recent criticism for alleged inaction, it’s still worth taking this step, at the very least to officially record your problem.

If your situation is more severe, meanwhile, you can also reach out for help from a student loan attorney or credit counselor, some of whom will help you for free if you can’t afford it. Also note that there are ways to change your student loan servicer if you’ve had enough of your current one.

 

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