The U.S. Department of Education has announced several new steps to help federal student loan borrowers better manage their student debt. The action comes in response to President Obama’s executive actions to help make student loans more affordable.
As a result, the Department has renegotiated the terms of its contracts with federal student loan servicers in order to strengthen incentives for them to provide excellent customer service and help borrowers stay up-to-date on their payments.
The agency hopes the action will help ensure that borrowers receive the highest quality support as they repay their federal student loans. It will also help the Department better monitor the performance of loan servicers to help them continue to improve, according to the Department of Education.
The renegotiated terms of the federal student loan servicer contracts are structured to create additional incentives for servicers to focus on the Department's priorities which according to the agency includes effective counseling and outreach to ensure borrowers select the best repayment option for them, as well as enhanced customer satisfaction for student and parent borrowers at all stages of the student loan life cycle.
These incentives include: revised performance metrics to increase the weight of the existing borrower customer satisfaction survey; a payment structure that focuses on servicers' success in keeping borrowers in on-time repayment status and helping borrowers avoid default; and incentives tied to each servicer's success in reducing delinquency in payments across their portfolio.
In the coming weeks, the Department will also begin the process to amend its regulations and allow more borrowers to cap their payments at 10 percent of their monthly incomes under an expanded Pay As You Earn repayment option, ensuring that students can repay their debt.
