A bipartisan group of lawmakers in the U.S. Senate introduced legislation on Monday that would cancel the Department of Education’s process to choose a contractor to service the billions of dollars in student loans that it issues.
The legislation, the Student Loan Servicer Performance Accountability Act, is sponsored by Sen. Roy D. Blunt, Republican of Missouri; Sen. Elizabeth A. Warren, Democrat of Massachusetts; Sen. James P. Lankford, Republican of Oklahoma; and Sen. Jeanne Shaheen, Democrat of New Hampshire. It stipulates that the department cancel its current process to choose a company, and any amendments to that process. It also says Secretary of Education Betsy DeVos “shall not award a contract to a single servicer to service all Federal Direct Loans.”
Ms. Warren said in a news release that the Education Department has a responsibility to “make sure student-loan servicing is working for student borrowers and for taxpayers. The Education Department’s plan to switch to a single servicer for its trillion-dollar loan portfolio heads in the wrong direction and could create a ‘too big to fail’ federal contractor.”
In May the Education Department announced that it would change its loan-servicing process by choosing a single company to handle the student-loan portfolio. “The federal student-loan-servicing solicitation we inherited was cumbersome and confusing — with shifting deadlines, changing requirements, and de facto regulations that at times contradicted themselves. Internal and external stakeholders both agreed it was destined for a massive and unsustainable budget overrun,” said Ms. DeVos when the shift was announced.
The department argued that by switching to a single servicer, it could exercise better oversight over the company. But the move immediately raised alarms for consumer advocates and lawmakers.
During a Senate Appropriations subcommittee hearing on June 6, when Ms. DeVos testified about the Trump administration’s budget request, Senator Blunt expressed concern about the switch. “We’ve been working with the department to create more competition among loan servicers,” he said, adding that a single loan servicer would eliminate such competition and fail to improve customer service.
The Higher Education Loan Authority of the State of Missouri filed a protest regarding the solicitation with the Department of Education in early July. The department, which has 30 days to respond to the request, is expected to do so by Monday.
Read the full text of the bill here:Return to Top