Miami Mortgage News

DeVos Halts Obama-Era Plan to Revamp Student Loan Management

With the stroke of a pen this week, Betsy DeVos, President Trump’s new education secretary, thrust the future of the government’s system for managing federal student loans into confusion.It was a high-stakes move: Her department administers $1.3 trillion in loans on behalf of nearly 43 million student borrowers.At issue is which companies will handle the bulk of those loans in the future, and how they will do it. Under the Obama administration, the Education Department was on the verge of selecting a single vendor to build a new system for servicing its student loans, in what was expected to be one of the largest federal contracts outside of the military.But on Tuesday, Ms. DeVos signed an order rescinding key parts of that attempt to streamline the system — essentially hitting the reset button on the Obama-era plan.Continue reading the main story RELATED COVERAGE Loans ‘Designed to Fail’: States Say Navient Preyed on Students APRIL 9, 2017 The Accusations Against Navient APRIL 9, 2017 Betsy DeVos is Publicly Polite, but a Political Fighter FEB. 23, 2017 YOUR MONEY 6 Tips for Avoiding the Worst Student Loan Repayment Traps JAN. 20, 2017“The guidance from the last administration resulted in a process that involved moving deadlines, changing requirements and a lack of consistent objectives,” the Education Department said in a statement. It did not specify what changes — if any — it might make to the program.The government has for years relied on a patchwork of nine loan servicing companies to send bills to borrowers, collect their payments and handle any problems that arise. Complaints about slipshod service are rampant. A study by the Consumer Financial Protection Bureau found that borrowers with all of the major servicers “encounter widespread problems” at nearly every stage of the process.The Obama administration sought to replace this labyrinthine system with a single entry point — a sea change in how student loan servicing would work. Instead of dealing directly with private vendors, all federal borrowers would gain access to their accounts through an Education Department portal, with standardized forms and processes. A single vendor would take the lead in creating the system’s interface; others would play behind-the-scenes roles, fielding phone calls and handling other customer-service tasks.The plan, hashed out for years and dangling a rich contract, represented a golden opportunity for the student loan industry. Last April, the Education Department opened bidding to find a vendor to build that system, and the winner would get a chance to construct the most visible government portal since Health Care.gov.In October, the government narrowed the field to three finalists: Navient; the Pennsylvania Higher Education Assistance Agency (better known as Fed Loan); and two companies, Nelnet and Great Lakes, that submitted a joint proposal. The winner was to be announced in February.