DeVos Cancels Obama-Era Memos on Improving Loan Servicing

By Allie Bidwell, Communications Staff

Education Secretary Betsy DeVos on Tuesday withdrew three policy memos issued under the Obama administration that focused on improving student loan servicing for borrowers, and changing the way the Department of Education (ED) determines which third-party servicers would participate in a new servicing platform.

DeVos sent the letter to James Runcie, chief operating officer of ED’s Office of Federal Student Aid, stating that “it is imperative to exercise due diligence in acquiring new federal student loan servicing capabilities,” but that the process “has been subjected to a myriad of moving deadlines, changing requirements and a lack of consistent objectives.”

“We now find ourselves in a situation where we must promptly address not only these shortcomings but also any other issues that may impede our ability to ensure borrowers do not experience deficiencies in service,” DeVos wrote. “This must be done with precision, timeliness and transparency.”

DeVos said that moving forward, she would withdraw three policy memos:

  • A June 30, 2016 memorandum from former Education Secretary John B. King Jr. to Runcie.

  • A July 20, 2016 memorandum from former Education Under Secretary Ted Mitchell to Runcie.

  • An October 17, 2016 addendum to the July 20, 2016 memorandum.

DeVos said she was removing the memos “to negate any impediment, ambiguity or inconsistency in the approach needed to accomplish this critical mission.”

ED in April 2016 launched its student loan servicing initiative, which was aimed at streamlining the servicing process for borrowers. Currently, borrowers make payments to one of ED’s contracted third-party servicers, such as Nelnet, Navient, Great Lakes Educational Loan Services Inc., or FedLoan Servicing. The Obama administration sought to create one online servicing portal with several servicers.

Under the new system, servicers would have had to use ED branding, rather than their own individual branding, to help ease confusion among borrowers. The previous administration also called for expanded oversight, including the use of the FSA Feedback System, which allows borrowers to submit complaints, provide feedback, and report allegations of suspicious activity.

“Servicers are the main touch point for the 40 million Americans working to pay off their federal student loans,” King said of the proposed system last July. “The bottom line is this: Every borrower deserves access to the right information and resources to manage – and ultimately pay off – their debt. When loan servicers make mistakes, or don’t provide the right information at the right time, borrowers pay the price. I’m concerned that less-than-stellar student loan servicing is tripping up borrowers as they seek to climb the economic ladder.”


Publication Date: 4/12/2017

Carson W | 4/14/2017 1:27:55 PM

Lame, she should be focused on getting our friends in Congress to put pressure on the IRS to make DRT avail. again instead nonsense such as this. Really? Kick the wolves out of the hen house and just stop the madness now. I know I'm preaching to choir here. Happy Friday!

Keyimani A | 4/13/2017 9:55:47 AM

I am not certain this Administration fully understands the challenges/experiences student loan borrowers have had with loan repayment. It's sad to withdraw something that aims to make experiences "better" for those entering repayment and lessen the convoluted process across the board.

Aesha W | 4/12/2017 9:59:02 AM

Interesting decision to make as one of your first few in the higher education arena. It's too bad she isn't concerned with the ease of use for consumers.

David S | 4/12/2017 9:31:44 AM

Judith - it helps the lenders/servicers. This is the same administration that wants to handcuff if not eliminate the CFPB.

Judith C | 4/12/2017 8:48:53 AM

How does this help?

You must be logged in to comment on this page.

Comments Disclaimer: NASFAA welcomes and encourages readers to comment and engage in respectful conversation about the content posted here. We value thoughtful, polite, and concise comments that reflect a variety of views. Comments are not moderated by NASFAA but are reviewed periodically by staff. Users should not expect real-time responses from NASFAA. To learn more, please view NASFAA’s complete Comments Policy.
View Desktop Version