Student Loan Servicers Under Inspection

THE NASFAA (National Association of Student Financial Aid Administrators)
recently announced that is teaming up with the NDSLC (National Direct Student Loan Coalition) on a joint force that will put new pressure on student loan servicers to improve how they handle the repayment process.

Some of the student loan servicers that would be under heavy examination include Sallie Mae, Great Lakers, Nelnet and The Pennsylvania Higher Education Assistance Agency.

The task force will focus on current servicing practices and make recommendations to the Department of Education’s Office of Federal Student Aid.

NASFAA is a nonprofit that represents nearly 20,000 financial aid professionals at about 3,000 colleges, universities and career schools. THe NASFAA prides itself on being the only national association whose primary focus is on student aid legislation.

“Over the last several years, financial aid administrators have voiced concern about disruptions, inconsistencies and lack of quality servicing on federal student loans,” said NASFAA President Justin Draeger. “However, it has been difficult to fully grasp the extent to which servicing problems exist, how widespread they might be, and how servicing practices may differ between various providers. This task force aims to more closely examine and report on these challenges.”

“As national cohort default rates and student debt rise, it is important that students who want to make their loan payments can do that,” added NDSLC Chair Chuck Knepfle. “This task force will help identify and recommend ways to improve communications and offer more effective repayment options to borrowers.”

Some of the past issues had to do with serialization, where the same servicer is used for all of a borrower’s direct loans, but where payments are applied differently. There’s also some interest in having a single phone number and single web site for Direct Loan borrowers to reach their servicer, especially when borrowers are occasionally moved from one servicer to another. There’s also been a call for allowing borrowers to switch servicers.

The task force will serve in an ongoing advisory capacity to NASFAA and the NDSLC. Two specific outcomes expected in early 2015 include:

1) A disclosure report that clearly shows different operational practices between various servicers.

2) A report to be delivered to the Department of Education and other relevant agencies containing recommendations for improving federal student loan servicing, indicating areas of deficiency in loan servicing and proposed solutions.

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