A group of Senate Democrats sent a letter to Education Secretary Betsy DeVos Thursday urging her to release more information about the Department of Education’s (ED) plans to award new contracts to student loan servicers for 2019 and how it will oversee those companies.
ED announced in September that it had selected more than a dozen companies as finalists to manage its new federal student loan servicing platform, the NextGen Financial Services Environment. In Thursday’s letter—spearheaded by Sen. Patty Murray (D-WA), ranking member of the Senate Health, Education, Labor, and Pensions committee, and signed by 24 others—the lawmakers asked ED to identify how it will hold vendors accountable for their performance, as well as for a list of the current regulations and mandates that loan servicers must comply with and the performance data used to monitor them, among other requests.
“Borrowers, taxpayers, schools, and policymakers are poorly served by the lack of transparency over student loan servicing,” the lawmakers wrote. “...In order to allow stakeholders across the higher education system to understand and evaluate the baseline you have proposed for the future of the student loan system—and to verify that the Department will uphold rules of the road—the Department should release much more information about the current effort.”
The lawmakers wrote that despite recent legislation from Congress mandating that ED investigate the potential contractors’ history of complying with consumer protection laws, they “remain strongly concerned that congressional directives to protect student loan borrowers will be ignored given the Department's pattern of actions to protect student loan companies from accountability.”
The senators wrote that they were especially concerned because “recent developments have raised serious questions whether student loan servicers may be actively harming borrowers by failing to inform them of their options.” They highlighted that, for example, every year more than 1 million borrowers default on their loans, which, according to the senators, is “often due to systematic servicing failures.”
The senators added that they were concerned about ED’s efforts to “obstruct independent oversight by states” when it reiterated earlier this year that it has the sole authority to regulate federal student loan servicers and that it has its own measures in place to protect student borrowers. They wrote that “the Department's go-it-alone track record in the intervening months offers little evidence to support this case.”
The lawmakers asked that ED respond to their requests for more information no later than January 3.
“As stewards of taxpayer dollars, we owe it to all federal loan borrowers to build a servicing system that makes repaying loans easier and holds student loan companies accountable if they break state and federal law,” they wrote. “As amended, NextGen does not meet these goals.”
Publication Date: 12/10/2018