Katie Brazis
August 2017

Single Servicing Platform Replacing Single Servicer Model

Back in May, Department of Education Secretary Betsy DeVos announced that she would be moving forward with Obama-era plans to streamline the student loan process via a single servicing platform. But she added her own provision: they would reduce the number of servicers to one.

The backlash was widespread and continued until early this week.

The major concern with the single-servicer model is that it would create a monopoly and cease to serve the borrowers. Remembering a time preceding multiple servicers, Robert Shireman, former deputy undersecretary of education under Obama, worries about the amount of power a single servicer would have.

“We felt we had little leverage because the whole system was operated by them, and they knew it would be such a huge endeavor to change that, so they didn’t have to be responsive,” said Shireman.

Four senators, led by Roy Blunt, D-Mo., introduced a bipartisan bill to strengthen the current system. The Student Loan Servicer Performance Accountability Act does the following things:

  • Cancels the competition that will determine which servicer is awarded the student loan portfolio
  • Requires future federal student loan solutions to include multiple servicers
  • Ensures that servicers will earn student loan accounts based on their performance
  • Prohibits the Education Department from awarding all federal student loans to a single servicer

The senators’ main goal is to improve accountability of the federal student loan servicers, which is the opposite of what they believe will happen if a single servicer is awarded the entire portfolio.

Hours after Blunt introduced the bill, Secretary DeVos announced that they will cancel the competition for a single servicer and may continue to contract with multiple servicers. Beyond the cancellation, the plans are somewhat unclear.

Instead, they are focusing on a single servicing platform that they are calling the FSA Next Generation Processing and Servicing Environment. The new platform will be comparable to similar private loan platforms in quality and ease of use, especially the customer service component.

Said Wayne Johnson, the new Chief Operating Officer of Federal Student Aid, “When FSA customers transition to the new processing and servicing environment in 2019, they will find a customer support system that is as capable as any in the private sector. The result will be a significantly better experience for students – our customers – and meaningful benefits for the American taxpayer.”

Elizabeth Warren, D-Mass., a cosponsor of Blunt’s bill, is pleased with the department’s decision to cancel the solicitation for a single servicer. However, she still believes the Student Loan Servicer Performance Accountability Act should be passed to prevent the department from awarding all loans to a single servicer in the future.

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Katie Brazis

Katie is a Content Coordinator with a BA in English and a Certificate in Editing and Publishing from CSU, Chico, and a Certificate in Copyediting from UC San Diego Extension. In addition to her professional history in editing, she has a deep love of stories. In her free time — when she’s not trying to tame the wild beast she calls her cat — Katie consumes stories in any form. She reads books and watches shows and movies. She plays cooperative games, both video and board, with her husband and friends. When she chooses to venture outside she keeps her phone handy to catch some virtual Pokemon.

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