Department of Education Pledges to Improve Customer Service for Student Borrowers

July 25, 2016
Jared Kaltwasser

The US Department of Education says it needs to do a better job of helping struggling borrowers and responding to customer complaints.

If you’re one of millions of Americans still paying off their federal student loans, the US Department of Education has a message for you: They want to be a better partner.

The Department of Education this week outlined a series of changes they say will improve the customer experience and protect borrowers against default and fraud. If the plan comes to fruition, it could eliminate some headaches for dentists with major student loan debt.

The new policies were outlined in a memo from US Secretary of Education Ted Mitchell. The memo follows an executive order from President Barack Obama last year that established a “Bill of Rights” for student borrowers.

“This guidance has the power to strengthen our student loan servicing system by providing long-overdue improvements to servicing,” said Deputy Treasury Secretary Sarah Bloom Raskin, in a press release.

The changes fit into five broad categories:

• Developing economic incentives that encourage repayment, while eliminating fixed fees that the department believes serve as a disincentive for struggling borrowers.

• Improving oral and written communication with borrowers to provide accurate and actionable information, particularly for borrowers at a high risk of default.

• Streamlining and coordinating Department of Education communications to ensure adequate, timely, and consistent communications from the agency.

• Speeding up responses to inquiries and complaints and increasing transparency to solutions when problems occur. The agency also plans to increase accountability by better monitoring its servicing vendors.

• Disclosing more data to the public in order to boost transparency about the agency’s performance.

The changes are largely focused around reducing defaults and improving customer service when problems occur. It’s unclear what changes, if any, will be noticed by borrowers who aren’t at risk of default and don’t encounter problems repaying their loans.

However, the new framework could become a roadmap for other lenders, if federal regulators have their way. The student loan improvement plan was developed in coordination with the Consumer Finance Protection Bureau, which is charged with protecting consumers in their dealings with financial services firms.

“These servicing standards can help to increase accountability and improve the quality of information borrowers receive about their loans and the affordable repayment plans they are entitled to by law,” said Rich Cordray, the CFPB’s director, in the press release. “We will continue working to stamp out illegal practices and look forward to the implementation of these critical protections that all student loan borrowers deserve.”

The CFPB has been working with the Treasury Department to find borrowers who are eligibility for loan forgiveness due to disability. They’ve also launched a pilot program to find new approaches to helping delinquent borrowers.

In the meantime, the Education Department has set up an online portal to file complaints or report suspicious activity. The portal, called the Federal Student Aid Feedback System, is online here.

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