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The Office of Federal Student Aid awarded new contracts to five loan servicers—a key milestone in the Education Department’s years-long effort to modernize its student loan system.
The department is planning to launch the first phase of the modernization next year. The overhaul would eventually centralize the student loan servicing system through one website. Currently, each servicer maintains its own website and servicing systems. During the first phase, borrowers will be able to use their Federal Student Aid IDs to log on to the servicers’ websites. The five servicers also will have to co-brand their communications with Federal Student Aid and maintain similar websites.
The new contracts, awarded Monday, will enable the agency to hold servicers accountable and offer financial incentives for the companies that keep borrowers current on their payments, according to a news release. The current contracts will stay in place through December 2024.
The department awarded contracts to Central Research Inc., EdFinancial Services, Maximus Education, Missouri Higher Education Loan Authority and Nelnet Diversified Solutions—all of which are current servicers.
“Building on efforts to overhaul loan servicing dating back to 2014, FSA is finally delivering on the promise to borrowers,” FSA chief operating officer Richard Cordray said in a statement. “These contracts focus on robust accountability and quality control mechanisms to make sure borrowers get the help and support they deserve. FSA will work with the servicers to develop the necessary infrastructure, training, and procedures so we can implement the new loan servicing environment in 2024.”
The modernization has been in the works for years and faced several delays. The Education Department’s inspector general recently criticized the agency for not following best practices in budgeting, planning and managing for the overhaul.
