Dive Brief:
- An audit by the U.S. Department of Education’s office of the inspector general found a consistent lack of oversight by the department of Xerox Education Solutions, which was contracted to fix the student loan debt management collection system.
- Department officials failed to enforce milestones set in the contract with Xerox and did not independently verify that fixes were made, resulting in a still-dysfunctional system by the end of the contract on Dec. 31, 2013.
- The Chronicle of Higher Education reports that the system’s failings cost taxpayers millions in unrecovered debt and left thousands of borrowers in limbo because their debt couldn’t be transferred back to a servicer once they started repaying in default.
Dive Insight:
The debt management collection system got an upgrade in 2011 by Affiliated Computer Services, which became Xerox Education Services after an acquisition. The system was faulty from the start, preventing the passage of loans from servicers to the government and back. That left more than $1 billion in defaulted debt with servicers who couldn’t transfer them to the system for collection, and it left 80,000 borrowers who had re-started payments in limbo, according to The Chronicle. The system’s failings also led to the government’s overpayments of debt collection agencies.