Federal student loans will be handled by a single company

May 29, 2017

The U.S. Department of Education announced that the federal student loans will be soon managed by one private company instead of nine currently on the market. Secretary of Education Betsy DeVos reported that this move will allow not only to cut the loan costs but will also improve the loan servicing interface, will simplify the payment application method and will shorten the time of response via emails and calls.

The process of narrowing down the number of companies in charge of the federal student loans started under the Obama administration, however the program was not completed and triggered a certain amount of criticism for being too complicated, so the new amendment to the plan is aimed at ā€œsuperior customer service and key borrower protectionsā€ as stated by Betsy DeVos.

Although a single servicing platform could be a major improvement in terms of easier management and faster processing, student loan supporters express skepticism regarding the quality of the future customer service and show apprehension about potential risks. Most analysts fear that reliance on the unique vendor can be dangerous for such a large-scale contract, because like any other monopoly a single company managing all federal loans may not demonstrate a competition-driven performance and could get out of control.

The Education Department has not revealed if there is a preferred loan service provider to be delegated the whole volume of work. In the meantime the four primary companies currently outsourced by the Government (Navient, NelNet, Great Lakes Educational Loan Services, and FedLoan Servicing) will be bidding for the contract.





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