Earlier this year, President Obama unveiled a Student Aid Bill of Rights to ensure strong consumer protections for student loan borrowers and issued a Presidential Memorandum to begin making those rights a reality. Last month, as part of that directive, the Department of Education announced a number of new steps we are taking to help Americans manage their student loan debt, including:
- Protecting Social Security benefits of Borrowers with Disabilities who may qualify for a loan discharge or other repayment options.
- Changing the debt collection process so that it is fairer, more transparent, and more reasonable.
- Providing clarity on borrowers seeking a discharge in bankruptcy.
Today, as another step forward in implementing the Student Aid Bill of Rights directives, Federal Student Aid (FSA) released the recommendations from an interagency task force on best practices in performance based contracting to better ensure that servicers help borrowers make affordable monthly payments. As directed by the Presidential memorandum, the task force reviewed input from its members in July. Now that these recommendations (pdf) have been finalized, they will inform the upcoming process of recompeting our servicing contracts prior to the expiration of the existing contracts.
Even ahead of that process, FSA has been taking steps to improve borrower service as it continues the transformation of the nation’s student loan program following the President’s landmark student loan reform. Many of these steps are in concert with the recommendations of the interagency task force. Key steps include:
- Ongoing development of an enterprise complaint system to track and support complaint resolution across all aspects of aid delivery, including servicing.
- Targeted email campaigns to borrowers regarding available repayment options, including campaigns related to IDR enrollment.
- Enhanced performance metrics and incentive-based pricing for Federal loan servicers to ensure consistency and accountability while creating additional incentives to focus on reduced delinquency and default, more effective borrower counseling and outreach, and enhanced customer satisfaction.
- Development and implementation of a robust enterprise data warehouse and analytics capability to support research of the portfolio.
- Designing and implementing a quarterly delinquency reduction compensation program to provide additional incentives for success in reducing delinquency in payments among our largest servicers’ portfolios with the greatest number of at risk borrowers.
- Increased focus on military service members, including a match with DOD to proactively provide service members with SCRA benefits,
- Enhanced loan counseling and the ability for borrowers to select their repayment plan based on their individual circumstances during exit counseling.
- Enhanced communication with and tools for borrowers including repayment calculators, loan consolidation application, and online application for income-driven repayment.
- A pilot to test different approaches for curing delinquent loans.
We are also working with our partners at the U.S. Department of the Treasury and the CFPB to continually improve the federal student lending program. For example, we are working with Treasury and the CFPB on how to improve credit reporting for student loans. In addition, as highlighted in a recent CFPB blog, Education, Treasury and the CFPB continue to work together to ensure student loan borrowers are aware of and can access affordable monthly payments. For Federal student loans, FSA and its servicing contractors have been certifying and enrolling, on average, over 5,000 borrowers per day into IDR plans over the past year. Enrollment in IDR plans has increased more than 50% over the past year and is at an all-time high.
Helping Americans manage their student loan debt has been a core priority of this Administration. In the coming weeks and months, we’ll continue to carry out the steps the President laid out in March and to take additional action to make college more affordable and ease the burden of student loan debt.