Education Dept. increases standards for student loan servicers

Agency Rule-Making & Guidance Department of Education Student Lending Student Loan Servicer

On October 15, the Department of Education announced revised standards for its student loan servicers effective early next year. The six identified student loan servicing companies signed contract extensions agreeing to comply with federal, state, and local laws governing student loan servicing and collections and will respond to complaints filed with those authorities in a timely manner. According to Federal Student Aid (FSA) Operating Officer Richard Cordray, the new standards “rais[e] the bar for the level of service student loan borrowers will receive. . .[and] come at a critical time as we help borrowers prepare for loan payments to resume early next year.” The FSA states that servicers that do not meet certain performance standards may see a decrease in the number of accounts placed with them, and servicers that assist borrowers avoid falling behind on payments, especially at-risk borrowers, will be rewarded.

Standards will measure several performance metrics including: (i) the percentage of borrowers who end a phone call before reaching a customer service representative; (ii) how well customer service representatives answer borrowers’ questions and help navigate repayment options; (iii) “[w]hether servicers process borrower requests accurately the first time”; and (iv) the overall level of customer service borrowers receive. Additionally, the six servicers will be required to submit “new, comprehensive reports,” which will provide FSA greater insight into borrowers’ experiences with loan servicers and allow FSA to track why borrowers contact their loan servicers, the type of borrower applications that are denied, and complaints borrowers send directly to loan servicers. FSA says it intends to publicly release the performance data.