The Office of Federal Student Aid (FSA) on Wednesday provided more details about the newly awarded contracts to five student loan servicers, and what’s next under the Unified Servicing and Data Solution (USDS), part of the Department of Education’s (ED) NextGen initiative, in a stakeholder call.
On Monday, ED announced that five companies were selected and awarded contracts as part of its larger overhaul of student loan servicing: Central Research, Inc.; EdFinancial Services; Maximus Education, LLC; Missouri Higher Education Loan Authority (MOHELA); and Nelnet Diversified Solutions. The five servicers selected will replace the legacy servicing contracts for Direct Loans and federally-managed Federal Family Education Loan (FFEL) Program loans. FSA said it’s planning to go live with USDS in the spring of 2024.
The call on Wednesday outlined what’s ahead for USDS, including benefits the initiative will provide to borrowers. While FSA noted that the overall goal is to have a single sign-on platform run through the StudentAid.gov website, that functionality will take time. In the meantime, the individual servicers will maintain their own websites, but they will be co-branded with the FSA logo, and will in the near future require all users to use an FSA ID to log in to their accounts.
Borrowers will also have an improved experience with Public Service Loan Forgiveness (PSLF), the TEACH Grant program, and total and permanent disability (TPD) discharge. Specifically, borrowers will have access to a dashboard available on StudentAid.gov to track important processes, such as their PSLF and TEACH Grant eligibility and repayment progress, and the progress and status of their application and forms. They’ll also be able to receive recertification reminders for the PSLF and TEACH programs, apply for reconsideration for TPD and PSLF, and be able to e-sign and submit documents.
While all five servicers will now maintain borrower accounts regardless of loan program — a change from the current process in which only one servicer is responsible for those loan types — any manual work required for these borrowers will be handled by FSA's Business Process Operations (BPO) vendors. This change allows borrowers to stay with the servicer they were originally assigned to when they enter repayment.
FSA also detailed the process of how those five companies were selected to receive contracts with ED. There were five factors considered when awarding these contracts, including: a technical evaluation; the servicer’s past performance; the servicer’s price; the servicer’s price of initial task order; and an evaluation of additional requirements.
FSA noted that borrower account allocations have not yet been determined, but FSA’s priority is to “reduce borrower disruptions as much as possible.” FSA said it will be working with those five companies for the next year to “bring their operations to comply with the USDS contract requirements.” FSA stated that borrowers who are assigned to servicers that will not be part of USDS will have their accounts transferred to a USDS servicer prior to the return of repayment, which is slated to begin sometime this summer or fall.
Additionally, FSA has announced a future change to the payment structure for servicers. Currently, servicers are paid a specific dollar amount per borrower based on loan status, but going forward, payment will be spread out over several line items, giving FSA a better picture of how much loan servicing actually costs servicers on a granular level.
With those changes, FSA said they will also be instituting financial incentives for servicers that serve at-risk borrowers to ensure they are able to give priority support to those borrowers as needed. New accounts will be allocated to servicers that have proven track records of keeping borrowers current. FSA will also be creating new accountability metrics for these servicers, called service level objectives (SLO). If a servicers fails to meet an SLO, that could result in corrective action plans and a possible withhold of monthly invoice payments.
FSA said it will provide future additional briefings as specialty program updates, single-sign on time frames, and account transfer processes if needed.
Stay tuned to Today’s News for more information on this topic.
Publication Date: 4/27/2023