The U.S. Department of Education on Friday announced it had renegotiated its contracts with federal student-loan servicers, giving them more incentives to keep borrowers from defaulting on their loans.
President Obama announced plans to renegotiate the contracts in June, but Friday’s announcement provides more detail. For example, customer-satisfaction surveys will now play a larger role in how the servicers are evaluated, according to a statement from the department.
Student-loan servicers have been criticized by federal regulators, consumer advocates, and, most recently, financial-aid administrators. In June the National Association of Student Financial Aid Administrators and the National Direct Student Loan Coalition announced the formation of a task force to focus on possible improvements in the servicing contracts.
The new contracts are just one part of the Obama administration’s push to reduce student-loan debt. The White House in June announced it planned to expand eligibility for income-based repayment, a program that caps borrowers’ payments at 10 percent of their income. According to Friday’s statement, that process will start “in the coming weeks.”Return to Top