The federal government has put out a call for bids to radically overhaul the student loan servicing program in 2019 with the goal of creating a unified website to pay and administer all federal student loans.   Sounds great, right?  The question is whether they can pull it off.

Even though the Federal government owns most of the federal student loans issues since 2010, any student loan borrower knows they have to go to their servicer — Nelnet, Great Lakes, Navient, etc. — to actually pay their loans.

This web of servicers can cause numerous problems.  For instance, some servicers offer different amenities even though all loans should be handled in the same way.  Great Lakes makes it easy to apply extra payments towards principal through their web platform, whereas other servicers may require a follow-up phone call.

Moreover, if you’ve been trying to get Public Service Loan Forgiveness, you know that your loans will be transferred to FedLoan Servicing, no matter what servicer you started out with.  FedLoan Servicing is the most difficult servicer to work with.  One major issue I see is that the transfer of student loans to FedLoans kicks the borrower out of their repayment plan, capitalizing interest and causing numerous headaches.

The idea of merging together the platforms of all servicers under the umbrella of a single government website is certainly appealing.  But as with any technological endeavor from the federal government (looking at you, Healthcare.gov), actually pulling it off will be quite a feat.

As highlighted by the Center for American Progress, which has been doing excellent reporting on this issue, it’s unclear whether the new system will improve accountability for the servicers or whether it will merely be a new, unified branding on top of the same old problems.  Additionally, the Office of Federal Student Aid (FSA), which would be administering the new platform, has already said that it may need to bring on additional expertise to coordinate and manage the program.

Everything is in the early stages at this point and it will be interesting to see what happens as the bidding process goes forward.  Clearly FSA and the Department of Education can see that the system needs an overhaul.  The question is whether the cure will be worse than the disease.

DISCLAIMER: THIS BLOG POST IS NOT LEGAL ADVICE AND DOES NOT CREATE AN ATTORNEY-CLIENT RELATIONSHIP BETWEEN THE READER AND MAURER LAW LLC.  SEEK LEGAL ADVICE IF YOU HAVE PARTICULAR QUESTIONS ABOUT YOUR STUDENT LOANS.

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