The Education Department Wants to Streamline Student-Loan Repayments. It Might Not Fix What Ails the Debt-Collection System.

The U.S. Department of Education announced on Tuesday that it will create a host of online tools that will allow student-loan borrowers to pay off their debt on a single federally-operated website and advise them on how they can best manage their debt.

The effort, which is being called the NextGen initiative, will also include the launch of a new web app called Aidan, which will answer hundreds of frequently asked questions, and a loan simulator that will recommend ways that borrowers can manage their student-loan debt. Students will also be required to see how much student debt they currently owe before taking on new loans and will be given clearer information about whether they are eligible for public-service loan forgiveness.

The new portal could help improve the complex and often confusing student-loan repayment system that the country’s 45 million borrowers navigate when paying off the collective $1.5-trillion student-loan debt. Under the existing system, borrowers pay servicing companies like Navient and Great Lakes. Some servicers have been criticized for routinely pushing borrowers into more-expensive repayment plans and for not doing enough to help students struggling to pay off their debts.

When announcing the changes at the annual Federal Student Aid Training Conference in Reno, Nev., Education Secretary Betsy DeVos said that the department is modernizing Federal Student Aid’s infrastructure and “totally revamping the way we connect with students.”

“We are undertaking a rigorous transformation of government services, bringing everything together behind one digital gateway,” said DeVos.

During the speech, DeVos also called for the Federal Student Aid office to act as a standalone government agency outside the purview of the Department of Education so it can act more like a bank. It is unclear how such a move would be put into effect; it would also require approval from Congress.

The NextGen initiative is in keeping with efforts championed by both the Obama and Trump administrations to equip borrowers with more information about the student-loan process so they can make more-informed decisions about which college to attend and how best to pay back their debt.

For instance, the Informed Borrower Tool, a part of NextGen that informs students about the amount of debt they owe before taking out another loan, will pull data from the College Scorecard, a federally operated website that was recently redesigned. That tool allows students to compare the cost of colleges with the earning potential of graduates.

Failing to Fix ‘Bad Results’

But critics point out that the new tools do not make up for the Education Department’s failure to monitor and oversee how loan-servicing companies interact with borrowers or to hold them accountable when they don’t follow the law. The DeVos administration has taken steps to curb that oversight and has blocked states from obtaining records needed to monitor those companies themselves.

Still, the new initiative, which simplifies the student debt application process, is encouraging, said Cody Hounanian, the program director at the nonprofit advocacy group Student Debt Crisis, which recently filed a lawsuit against the Consumer Financial Protection Bureau for failing to monitor student-loan-servicing companies.

But Hounanian said that repayment programs are complicated and worried that NextGen will advise borrowers on their options through a “one-size-fits-all” approach that does not account for individual nuances. He also said that the department needs to raise awareness to ensure that borrowers know these tools exist, and he observed that creating the portal does not absolve the federal government of overseeing servicing companies.

“We have been advocating with our partners for years about simplifying these processes, and I think incorporating technology to a certain extent is part of that,” said Hounanian. “But improving the online tools doesn’t fix many of the other issues that create bad results for borrowers.”

It is unclear when the new NextGen tools will become publicly available. The Department of Education said in an email that various tools will be released over the winter and next spring. The Informed Borrower Tool is scheduled to be released in July.

The department plans to make the Aidan tool available to some borrowers on December 22 and to other customers incrementally throughout next year. The loan simulator will be released some time in early 2020.

Another facet of NextGen is geared toward colleges: a website that will allow administrators to file and track documents, and provide training and guidance, among other things.

Danielle McLean writes about federal education policy, among other subjects. Follow her on Twitter @DanielleBMcLean, or email her at dmclean@chronicle.com.