The Obama administration is taking action to better protect students who borrow money for college.
The Education Department on Wednesday announced a series of enhanced protections and customer service standards to better guide federal student loan servicing practices.
In a memo, Undersecretary of Education Ted Mitchell directed the Federal Student Aid (FSA) office to improve how it communicates with borrowers — especially those borrowers who are at the highest risk of default — about repayment plans.
Under the new policies, the FSA will be required to use only U.S. Department of Education-branded letterhead and create web pages and printed materials that have the same look and feel as the agency’s site to eliminate confusion.
The agency said the goal is to give borrowers a single website they can log into to access information, make payments, apply for benefits and manage their account. The goal is to create a page other loan vendors or customer service providers can join in the future.
The Consumer Financial Protection Bureau (CFPB) said about 43 million consumers owe money on student loans, and one in four student loan borrowers are past due or in default.
“Student loan servicers are paid to manage student loan accounts and have a responsibility to inform borrowers — especially troubled borrowers — about options for affordable monthly payments and to help them get on track,” CFPB Director Richard Cordray said while announcing the new policies with the Education Department on Wednesday. “But increasingly, the evidence suggests that servicers too often fail to meet that responsibility.”
Sen. Elizabeth WarrenElizabeth WarrenThe Trojan Horse of protectionism Federal Reserve officials' stock trading sparks ethics review Manchin keeps Washington guessing on what he wants MORE (D-Mass.) has long been pushing the Education Department to overhaul its student loan servicing to better protect student borrowers.
In a letter last week, Warren and nine other Senate Democrats demanded the agency provide more detailed, clear and specific requirements and instructions than it is has done in the past and hold student loan servicers accountable for providing high-quality customer service so borrowers receive consistent, accurate, complete and actionable information about their repayment or debt relief options.