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“Hold the highest standards or face the consequences”

Ayelet Sheffey

President Joe Biden. Kent Nishimura/Los Angeles Times via Getty Images

  • The Department for Education has announced that it is extending the contracts of six student loan companies until 2023.

  • The companies have agreed to higher standards to protect borrowers and ensure a smooth transition to repayment in 2022.

  • FSA chief Richard Cordray previously said student loan companies were closing for fear of accountability.

After President Joe Biden announced in August the “permanent” extension of the student loan payment freeze during the pandemic, three student loan companies announced plans to shut down their federal services, alarming borrowers and advocates who fear a administrative mess with the reboot. payments next year.

But the Department for Education clarified on Friday that the six student loan companies continuing their contracts have agreed to higher standards, both during the transition to repayment and for the duration of their contracts.

The ministry announced in a Press release that it has extended the contracts of six student loan companies, and that these contracts contain higher standards of performance, transparency and accountability that will protect borrowers who will be “essential” to ensuring a smooth transition to reimbursement. Specifically, the new terms give the Federal Office of Student Aid (FSA) greater ability to monitor issues with services as they arise and require businesses to comply with national laws, local and federal loan servicing.

“The FSA is raising the bar for the level of service that borrowers will receive,” FSA Director Richard Cordray said in a statement. “Our actions come at a critical time as we help borrowers prepare for the resumption of loan repayments early next year. The excellent work being done by our negotiating team here allows us to ensure that managers of loans meet the highest standards or face consequences.”

The press release noted that the six companies – Great Lakes, HESC/Edfinancial, MOHELA, Navient, Nelnet and OSLA Servicing – have agreed to extend their contract until December 2023. Notably, while Navient signed a contract extension in September, it later became the third company last month to request the closure of its federal loan services, which the department is currently reviewing.

The FSA will measure companies quarterly on their ability to meet targets related to:

  • The percentage of borrowers who end a call before reaching a customer service representative;

  • How well customer service representatives answer borrower questions and navigate repayment options;

  • If the services handle borrowers’ request accurately the first time;

  • And the overall level of customer service provided to borrowers.

Cordray said while speaking at a conference earlier this month that student loan companies are choosing to shut down rather than face greater liability. Granted, he didn’t comment on specific companies, but noted that “not everyone was thrilled” with his plans to increase oversight of the industry.

This is the latest effort by the Biden administration to crack down on student loan abuse. Last week the FSA announced it was re-establishing an enforcement office to ‘vigorously investigate’ abuses of student loans and federal school aid, and it follows Rohit Chopra’s confirmation to lead the Office. Financial Consumer Protection (CFPB), which highlighted its plans to protect student borrowers.

As Insider previously reported, borrowers have had immense difficulty receiving help from their student loan companies, preventing them from repaying their student debt. Charles Moore, 49, previously told Insider he had a simple question about consolidating his loan with his wife’s, and he ended up on the phone for four hours trying to get an answer.

“Nobody wants to help you,” Moore said. “And you don’t know how to get help. Even if you go back and forth, the lender doesn’t know what the servicing agent is doing and the servicing agent doesn’t know what the lender is doing.

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