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Senators Urge Education Department to Reform Student Loan Servicing to Better Protect Borrowers

Text of the letter available here (PDF)

Washington, DC - In a letter sent today, Senate Health, Education, Labor, and Pensions (HELP) Committee Ranking Member Patty Murray and Senator Elizabeth Warren (D-Mass), along with Senators Barbara Boxer (D-Calif.), Dick Durbin (D-Ill.), Sherrod Brown (D-Ohio), Sheldon Whitehouse (D-R.I.), Richard Blumenthal (D-Conn.),  Tammy Baldwin (D-Wis.), Chris Murphy (D-Conn.), and Edward J. Markey (D-Mass.) urged the U.S. Department of Education (ED) and its Office of Federal Student Aid (FSA) to make reforms to federal student loan servicing to better protect borrowers. The letter comes as ED begins a new competition for the next round of student loan servicing contracts.

The senators highlighted ongoing failures of federal student loan servicing, explaining, "An astounding eight million borrowers are in default. These statistics reflect that poor customer service and shoddy student loan servicing practices are contributing to many borrowers unnecessarily struggling with their student loans. It's time for this to change."

The letter identifies steps that ED and FSA should take to improve student loan servicing, including:

  • Provide far more detailed, clear, and specific requirements and instructions than it is has done in the past, and contractually ensure that servicers employ such requirements and instructions to deliver effective student loan servicing.
  • Use these new standards to finally hold student loan servicers accountable for providing high-quality customer service that results in borrowers receiving consistent, accurate, complete, and actionable information about their repayment or debt relief options.
  • Ensure that the new competition results in a servicing platform that allows multiple customer service providers to compete to best serve students.
  • Adhere to Secretary King's June 30th directive to make past performance "the most important noncost factor in the evaluation."
  • Shift the financial incentives for servicers by paying service providers based on how well they guide borrowers into the program that best meets their unique needs, and reward servicers that demonstrate strong performance in a more targeted manner.
  • Hold servicers responsible if they ‎violate the servicing standards or federal laws and let borrowers hold the Department accountable in court for doing its job

"Student loan servicers are a critical link between borrowers and the Department of Education. With about one in four student loan borrowers in default or delinquent on their federal student loans, it is critical that the Department step up to address the student debt crisis and ensure that all service providers in the student loan program are doing everything they can to put students and families first," wrote the senators.

Read a PDF copy of the senators' letter here. The letter comes after Senator Warren earlier this year called on ED to implement five fundamentals to student loan servicing reform.