The US Department of Education has announced a major overhaul of the student loan service.
Here’s what you need to know — and what it means for your student loans.
The Department of Education mentioned Thursday that more than 35 million student borrowers can expect a “21st century customer experience” when it comes to their student loans. Federal Student Aid, the largest provider of financial aid for universities in the United States, has released the tender for the Unified Service and Data Solution (USDS), which is intended to serve as a service solution term student loan for federal borrowers. . Specifically, the USDS will seek to hold student loan servicers accountable with clear performance goals such as reducing student loan defaults and delinquent student loans. Specifically:
- six loan managers support student borrowers during student loan repayment;
- student loan servicers operate independent websites, have independent staff, and communicate with student borrowers one-to-one;
- given the lack of a centralized platform, student borrowers may have different customer service experiences, which can be confusing; and
- therefore, student borrowers often receive inconsistent or incorrect information about potential student loan repayment options, which can lead to student loan default.
This latest announcement is part of a broader, ongoing initiative within the Biden administration to simplify student loan repayment, increase student loan forgiveness, and keep student loan managers at a higher level. (Student loan forgiveness: 5 key takeaways from the major announcement).
Student loans: how this new system will help student borrowers
The new customer service platform is intended to help student borrowers in several ways, including:
- replace the old student loan servicing contracts for direct loans and federally administered FFELP loans;
- offer federal student loan borrowers comprehensive management of their student loans through StudentAid.gov;
- ensure a more seamless transition during student loan account transfers;
- increase the accountability of student loan managers through measurable benchmarks; and
- use student loan servicer monitoring to reduce delinquencies and defaults on student loans.
Student Loan Servicers: What Should Student Borrowers Expect?
Current student loan servicing contracts expire in December 2023. Federal Student Aid plans to decide on new student loan servicing this winter, with new servicing beginning when current contracts expire. Student borrowers can expect several changes to student loan servicing over the next few years, including:
- major updates to technology, processes and operations to improve user experience and outcomes for students, parents and student borrowers;
- USDS student loan managers will manage student loan platforms, contact centers, and manual student loan processing activities;
- customer service for the Civil Service Loan Forgiveness Program, TEACH Grants, and Total and Permanent Disability Discharge (TPD) will be moved to StudentAid.gov and Federal Student’s Business Process Operations Providers Aid;
- USDS student loan services will co-brand with Federal Student Aid, including a single sign-on student loan borrower interface with a Federal Student Aid ID;
- within five years of the go-live date, the FSA will move full account management, branding, and student loan repayment off the USDS student loan servicer websites;
- eventually, student borrowers will manage their federal student loans “via a single FSA-branded interface”;
- student borrowers will then be able to manage all aspects of their federal student loans on Federal Student Aid, including completing the Free Application for Federal Student Aid (FAFSA®) and pay off student loans.
They will be able to manage their entire student aid experience, from the end of the Free Application for Federal Student Aid (FAFSA®) form to successfully repay their loans, on StudentAid.gov. The Education Department is focused on simplifying student loan administration and student loan repayment while improving customer service and student borrower outcomes. That said, the best way to manage your student loans is to not have them. With student loan repayment set to restart soon, here are some ways to pay off student loans faster: