Renegotiated contracts incentivize better support for student borrowers; new initiative led by Under Secretary Mitchell will continue to improve service
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As a result of
In addition to these important steps, today
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 plan option, ensuring that students can repay their debt.
"All hard-working students and families deserve high-quality support from their federal loan servicer, and we are continuing to take steps to make sure that is the case,"
In administering the federal student loan programs, the Department's top priority is to help students pursue and complete quality higher education programs. The performance-based contract renegotiations emphasize the importance of helping borrowers stay current on their loans and avoid default, while also incentivizing customer satisfaction. Loans will be assigned to servicers based on how well they perform on these and other metrics. This competitive structure to the contracts will ensure that borrowers receive high quality service while maximizing value for the taxpayer.
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: effective counseling and outreach to ensure borrowers select the best repayment option for them, and enhanced customer satisfaction for student and parent borrowers at all stages of the student loan life cycle. These incentives include:
Revised performance metrics that increase the weight of the existing borrower customer satisfaction survey from 20 percent of the overall score to 35 percent.
A payment structure that focuses on servicers' success in keeping borrowers in on-time repayment status and helping borrowers avoid default.
Additional incentives tied to each servicer's success in reducing delinquency in payments across their portfolio.
In addition, the Department is doubling down on efforts to make sure America's active duty service members are served well, requiring loan servicers to focus dedicated resources and enhance outreach and information efforts for this important population.
The revised metrics will replace the federal student loan servicers' quarterly and annual customer satisfaction survey scores and the default prevention statistics used to determine each servicer's allocation of new loan volume. The most recent scores are published here. Additionally, in an effort to promote transparency and provide easily accessible data for customers and stakeholders, the
The Department also has contracts with seven not-for-profit entities to service student loans. These entities have operated under separate pricing and performance metrics, but beginning
Current federal Title IV Loan Servicers (TIVAS) include:
More information about the performance of federal student loan servicers can be found on the Department's website at studentaid.ed.gov.
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