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Education Department Announces Framework for Student Loan Servicer Accountability

The Biden-Harris Administration has announced a new framework to better hold student loan servicers accountable and protect borrowers from servicer errors.FSA COO Richard CordrayFSA COO Richard Cordray

“The Biden-Harris Administration has made clear that we will not allow borrowers to pay the price for unacceptable servicing failures,” said U.S. Secretary of Education Dr. Miguel A. Cardona. “Today’s announcement should send a clear message to all our contracted student loan servicers that the Department will use the full scope of our oversight and accountability tools to ensure borrowers get the level of service they deserve.”

The Department of Education’s (ED) framework comprises various practices regarding oversight, enforcement measures for servicers, and accommodations for affected borrowers.

“The loan servicing environment has changed drastically since the Department began working with multiple servicers in 2009,” said Federal Student Aid (FSA) COO Richard Cordray. "The return to repayment is an unprecedented time in the Direct Loan program, and in 2024, we will transition to new contracts that provide us with updated requirements for servicers and more ways to ensure borrowers get the support they deserve."

In terms of oversight, ED will monitor servicers, track complaints, identify real time problems, and examine results-based outcomes, through the use of strategies such as secret shopper calls and listening to servicer-customer interactions.

And if and when servicers display issues and fail to meet ED standards, ED can grade servicer performance, withhold payments, re-allocate borrowers to other servicers, and impose remediation plans so that servicers help hindered borrowers. Affected borrowers can also be placed into periods of short administrative forbearance or have their interest adjusted while servicer errors are addressed.

Additionally, ED will be transitioning to Unified Servicing and Data Solution (USDS) for new loan servicing environment in Spring 2024, in order to provide strengthened security, accountability, and transparency that current legacy contracts do not.

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