Six student loan managers working on federal student loans with the US Department of Education (DOE) have agreed to new contractual terms that will be in effect until December 2023.
“The new contract terms give the department’s Federal Student Aid Office (FSA) greater ability to monitor and resolve service issues as they arise; require compliance with federal, state and local laws pertaining to loan servicing; and hold officers accountable for their performance, including withholding new loans and associated income in the event of poor performance, ”according to the DOE announcement. “These changes will be critical as the FSA works with Student Loans Services to implement the Biden-Harris administration’s commitment to reform the student loan service and ensure a smooth transition for borrowers out of the financial hiatus. student loans ending January 31, 2022. ”
Great Lakes, HESC / Edfinancial, MOHELA, Navient, Nelnet and OSLA Servicing have accepted the contract extension.
In September, Navient announced that it had agreed to transfer its service contract to student loan company Maximus, ending its participation in the federal student loan service program, ACA International previously reported. The DOE approved the transfer of Navient’s account, according to a press release released today by Navient.
According to the DOE, the Consolidated Appropriations Act 2021 gives the FSA the power to extend contracts with loan officers for up to two years.
“The FSA is raising the bar for the level of service that student loan borrowers will receive,” said FSA chief operating officer Richard Cordray. “Our actions come at a critical juncture as we help borrowers prepare for the resumption of loan repayments early next year. The excellent work done by our negotiating team here allows us to ensure that loan services meet the highest standards or suffer the consequences. “
The contracts of two current companies, the Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management, will not continue. Earlier this year, those companies announced their intention to stop managing federal student loans and those accounts will be transferred to other federal contractors, the ACA previously reported.
Federal student loan payments are currently on hold until January 2022 due to the COVID-19 pandemic.
Coincidental contract extensions also include new FSA performance standards in addition to existing measures related to service providers’ efforts to keep borrowers from falling behind on their payments.
According to the DOE announcement, the FSA will quarterly assess loan services on their ability to meet set goals related to:
- The percentage of borrowers who end a call before reaching a customer service representative by phone.
- How well do customer service representatives answer borrowers’ questions and help them navigate repayment options.
- If providers process borrower requests accurately the first time.
- The overall level of customer service provided to borrowers.
The FSA will limit new loans granted to services that do not meet those standards consistently and there will be rewards to help borrowers avoid falling behind on their payments, according to the DOE.
When the new contract terms come into effect, the FSA will also require providers to maintain call center hours, including Saturdays, and loan service providers to increase the number of loan representatives. Spanish speaking customer service.
Plans to Reshape the Future of Student Loans Service
These extensions and new contract terms are just one part of the Biden administration’s long-term efforts to improve service on federal student loans. The changes reflected in the new contract terms will complement the short-term changes to service provider requirements for borrowers’ transitions to repayment on February 1, 2022.
Over the next year, the FSA will take additional steps to implement a broader vision to ensure borrowers have easy access to the clear, accurate, and timely information they need to manage their federal student loans. In addition to building on enhancements to FSA’s digital platform, including StudentAid.gov and the myStudentAid mobile app, the department will work on a permanent contract approach to enhance stability, transparency of services, liability and performance beyond the two-year period authorized by Congress. .
ACA members working with student loan borrowers or other consumers with questions can share the latest advice of the Consumer Financial Protection Bureau on the process of resuming payments and whether their loan is transferred to a new provider, ACA reported previously.
FSA also offers advice on loan transfers here.
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Big waves come when student loan payments resume