Dive Brief:
- The U.S. Department of Education has renegotiated contracts with the four main servicers of federal student loans in response to criticism over its allegedly lax oversight.
- Now, the servicers will be paid bonuses for lowering borrower delinquency rates, and they’ll have other incentives to help borrowers who are having payment problems, Inside Higher Ed reports.
- Student borrower advocates say the Department of Education's changes are encouraging, but more change is needed, such as measuring loan servicer performance against objective standards, not just against each other.
Dive Insight:
Earlier this year, the largest loan servicer, Navient, and its former parent company, Sallie Mae, agreed to pay a multi-million-dollar settlement in exchange for federal prosecutors dropping charges about alleged overcharges for military service members. The president of the United States Student Association says the allegations are severe enough to keep Navient from receiving another loan servicing contract. Inside Higher Ed calls the education department’s loan servicing changes the most drastic in five years — the period during which the department has been originating all federal student loans.