Department of Education Releases Phase II Amending the Federal Student Loan Servicing Solicitation

Lending Student Lending Consumer Finance Department of Education

On May 19, the U.S. Department of Education (Department) announced the formal amendment of Phase II of the federal student loan servicing solicitation. According to a fact sheet issued by the Department, the amendment outlines plans to select a single student loan servicer that all borrowers will interact with on a unified platform. This is a departure from the current system in which nine servicing companies handle borrowers’ payments of their federal student loans. The amendment further clarifies and lists the Department's expectations of the eventual servicer. U.S. Secretary of Education Betsy DeVos commented on the announcement, “[w]ith changes in the new amendment, we have simplified the process to ensure meaningful borrower protections while saving taxpayers more than $130 million over the next five years. Savings are expected to increase significantly over the life of the contract. Borrowers can expect to see a more user-friendly loan servicing interface, shorter email and call response times and an improved payment application method that will maximize the benefit of each payment the borrower makes. Our amendment makes no changes to repayment plan requirements.”

As previously covered in InfoBytes, DeVos also rolled back Obama administration policies developed to guide the way in which the federal government contracts with outside servicers.