ED Responds to Senate on Preferred Lender List Inquiry and Servicing Topics
By Joelle Fredman, Communications Staff
As part of the Trump administration’s fiscal year (FY) 2019 budget proposal released Monday, the Department of Education (ED) responded to directives included in a Senate committee appropriations bill — related to student loan counseling, loan servicing, and borrower defense claims — within its budget justification.
The Trump administration’s budget request included a $3.8 billion cut to ED and the elimination of essential programs such as Public Service Loan Forgiveness (PSLF) and the Federal Supplemental Education Opportunity Grant (FSEOG) program, as well as a cut to funding for the Federal Work-Study (FWS) program. In ED’s explanation of these proposed cuts and shifts of funds, it responded to requests included in the FY 2018 Senate Labor, Health and Human Services Education Appropriations Act.
Within the bill, the Senate committee directed ED to provide guidance on how colleges and universities can allow state-based organizations to counsel students on loan programs without violating the Preferred Lender List law that prohibits these organizations from marketing or advertising loan programs to students. ED responded, however, that it “believes that it currently lacks the authority to comply with this directive absent of a change in law.”
The committee also included multiple directives to ED in its bill related to student loan servicing. For example, members requested that ED collaborate with committees in both the House and Senate on the design of a new loan servicing environment, dubbed the “FSA Next Generation Processing and Servicing Environment,” which Education Secretary Betsy DeVos introduced in August. According to DeVos, this new system would provide a single platform for borrowers to access their account information, and ED responded that is has and will continue to collaborate with committees for input as it transitions to this new environment.
Committee members also directed ED, for the second year in a row, to issue a policies and procedures manual to “help improve the consistency of servicing for student loan borrowers,” which would include items such as best practices for counseling students about repayment options and benefits. ED responded that is currently pursuing “an acquisition approach for federal loan servicing that it believes best balances high-quality service for borrowers and value for taxpayers.” The development of a standardized policies and procedures manual was a recommendation in NASFAA’s 2015 Servicing Issues task force report.
The committee also reiterated to ED that it should require that students be allowed to select from any existing loan servicer when consolidating their loans, which ED confirmed is the case as of December 2017.
In addition, the committee issued directives to ED related to the closure of Corinthian Colleges and borrower defense claims, pushing ED to ensure that, under Devos’ leadership, borrower defense claims are reviewed quickly, and that students are contacted and notified of their eligibility for relief.
“The committee recognizes that there is ongoing disruption to and burden on the lives of students from the closure of and misconduct by Corinthian Colleges, Inc. (CCi),” the members wrote. “At least 45,000 former CCi students have pending applications with the Department for a discharge and refund of their fraudulently issued federal loan debt and the committee believes that many students have not applied.”
ED responded that, following a review by the ED inspector general, a proper process was put in place to review those claims. ED also noted that it has begun reviewing borrower defense cases and reduced the backlog of claims, and has reached out to borrowers who may be eligible for relief through mail, email and social media. In fact, ED announced in December that it has established a new “tiered” relief system of processing borrower defense claims and used it to rule on 21,500 pending claims from students formerly enrolled in Corinthian Colleges schools.
ED also confirmed that it will comply with another one of the committee's directive to issue reports to the House and Senate on the status of borrower defense claims on a quarterly basis. Specifically, the committee requested reports include the total number of pending claims, the total amount of relief awarded, and the number of denied claims.
Publication Date: 2/15/2018
You must be logged in to comment on this page.