The U.S. Department of Education plans to streamline the borrowing process to make it easier to pay student loans, and have the companies that collect those loans provide uniform information so students don’t receive misinformation, department officials indicated in a blog post on Monday. The department will release more information soon.
The process will be made more “user-friendly” so that borrowers can make payments on loans through one Education Department web portal. Now, students may have to visit the sites of several different loan servicers to make payments. In addition, to make things less confusing for borrowers, the four major loan servicers — which include Navient, Netnet, Pennsylvania Higher Education Assistance Agency, and Great Lakes Educational Loan Services Inc. — will have to use the department’s branding instead of their own logos, Inside Higher Ed reported.
The department is also planning to create clear standards for what these companies, which are paid millions of dollars by the federal government, can tell borrowers about income-based repayment programs. This is important because, according to a recent report from the Consumer Financial Protection Bureau, servicers often make major errors that hurt borrowers. They may fail to explain what borrowers’ options are or set them up with a different plan than they asked for.
In addition, student debt relief scammers can take advantage of what is often a confusing system for borrowers to navigate. These scams promise borrowers can have their payments cut by 50 percent or more if they pay the scammer anywhere from $500 to $2,500. By feeding into the idea that the system is too complicated to navigate without expert help, scammers are able to collect money from borrowers who are already struggling. The CFPB is monitoring these scams closely.
The department’s actions come after a wave of criticism about the current system from U.S. senators, consumer advocacy groups, and the agency’s inspector general. For months, Sen. Elizabeth Warren (D-MA) and other Democratic lawmakers have been pushing for more oversight of student loan servicers, as well as for immediate debt relief for students who have been scammed by for-profit colleges.
In 2014, the U.S. Department of Justice fined one of the companies, Navient, $60 million for charging higher interest rates for active-duty service members than they were legally allowed to. In May of last year, the department released a review of student loan servicers that found the four major companies complied in the “vast majority of cases” with the Servicemembers Civil Relief Act. But Sens. Warren, Richard Blumenthal (D-CT), and Patty Murray (D-WA) pushed the agency’s inspector general to investigate the review, since it contradicted the U.S. Justice Department’s findings. After the inspector general investigated further, it released a report in February that criticized the review for being flawed and inaccurate.
Just a few days ago, Warren again called for changes to reform the repayment process, such as requiring servicers to ensure borrowers are on the best repayment program for them, according to MassLive.com. Warren also wants the department to make sure borrowers have a more effective complaint process through which they can report these problems.