The Education Department said Friday that it will select one company to collect student debt payments on its behalf, rather than the nine contractors that currently handle the federal government’s $1.2 trillion portfolio of education loans.
The new plan is a return to the way student loans used to be collected by ACS Education Services, a role that critics of the company said led to widespread failures in customer service and loan consolidations.
Robert Shireman, a former deputy undersecretary of education recalls the department being frustrated by the amount of power ACS held as the only servicer. “We felt we had little leverage because the whole system was operated by them, and they knew it would be such a huge endeavor to change that, so they didn’t have to be responsive,” said Shireman. “There was a move to add at least a couple servicers so you’d have competition and the department wouldn’t be stuck in that situation again.”
Just as bad, this “single” collection service can subcontract its work, so it won’t be so “single” after all:
And while there will only be one primary servicer, the department will permit that company to hire subcontractors to lighten the load.
Going back to the failed system before is irresponsible and reckless, but DeVos is also going to set students up for failure, on purpose:
The new contract will strip out mandates aimed at helping borrowers who fall behind on payments and people enrolled in income-driven plans. The servicer would no longer be required to have specialists on hand to aid people in delinquency, nor would the company have to remind borrowers to reenroll in income-driven repayment weeks before the deadline. Removing those sorts of mandate reduces some of the bureaucracy of servicing but could also prove detrimental to keeping borrowers from defaulting.