A survey from 2015 revealed unsettling news about federal student loan servicers that ties into the planned changes involving the new customer feedback system. These changes are aimed at improving the overall system that involved the federal government, the loan servicer, and the borrowers.
The government announced plans to centralize the student loan servicer feedback system after discovering some unsettling results about the customer experience with student loan servicers. On top of all this, there were serious shortcomings in the reports from these federally supported companies.
In short, the student loan servicer companies dropped the ball. They are a critical part of the federal student loan system since they are essentially the middle man between the government and borrowers. It is believed that these issues contributed to the student loan situation which exceeds $1.4 trillion in outstanding debt (with close to 25% in default or delinquency).
Servicing companies failed to provide consistent data on student loan performance, student outcomes, demographics, and salary data. There were several “significant data gaps” for these areas despite their importance. This data provides insight on default and delinquency causes, the entire student loan situation in general, and more.
On top of inconsistent data reporting, these student loan servicers reportedly extenuated problems leading to barriers on financial relief. A slew of problems were reported. There were payment processing issues, and unwarranted interest rate charges and fees were common. These issues extended repayment period for some borrowers, but it generated confusion on both ends which affected loan performance overall.
In addition to poor servicing, these companies withheld information from their borrowers when it came to different relief programs and qualification criteria. Many borrowers were unaware that they were eligible for lower monthly payments, federal loan consolidation, income-driven repayment plans, federal loan forgiveness, and more.
In light of these finds, the government implemented their new customer feedback portal. It has essentially centralized all feedback towards the Department of Education. With this change, better oversight over the student loan servicers is possible. This led to new regulations for these companies. In the end, the main objective is to improve the overall student loan situation. This requires “dotting our ‘i’s and crossing our ‘t’s” which is essentially what the government is doing with the student loan servicers. The hope is that these regulations improve communication and loan performance for the borrower which in turn improves part of the overall issue.