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The U.S. Department of Education should largely keep its current model for student loan servicing, but officials should set higher and more consistent standards for the companies they hire to do that work, according to recommendations issued Friday by an interagency task force.
The recommendations will inform the Education Department’s new contract with loan servicers that it expects to sign at some point next year.
The task force, convened by the Obama administration earlier this year as part of a push to improve federal student loan servicing, suggested in a report that the Education Department continue to have multiple contractors who compete among themselves for new loan servicing business from the government. The government should pay contractors extra to help borrowers deemed at a high risk of default and it should standardize some of their activities as they compete among themselves for new accounts, the report says. For example, all contractors should be required to provide borrowers with information about income-based repayment programs.
