Feds Overhaul Servicing Contracts
Career College Central Summary:
The U.S. Department of Education on Friday announced changes to how it pays the companies that manage student loan payments, responding to growing criticism that its oversight of those companies is inadequate.
Officials have renegotiated the government’s contracts with the four main loan servicers, which together collect payments for tens of millions of federal student loan borrowers.
The servicers will now also receive bonuses for reducing the delinquency rates of their borrowers. And borrower feedback will figure more prominently into the formula that dictates how many new accounts the servicers receive each quarter.
The revamped agreements are aimed at creating better incentives for the companies to provide good customer service and make sure that borrowers are repaying their loans on time.
Some critics have said that the companies aren't doing enough to help struggling borrowers. The department also said it would explore additional changes to the federal direct loan program and pledged to solicit suggestions from student borrowers.
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