nASFAA Task Force Report: Servicing Issues

A recent report from the National Association of Student Financial Aid Administrators (NASFAA) made recommendations to the U.S. Department of Education (ED) on ways to improve federal student loan servicing. The report, developed by a task force made up of individuals from all types of postsecondary institutions, proposed six recommendations (detailed below), many of which could be considered in future contract negotiations between ED and loan servicers.

The recommendations are:

• Create one central loan portal where students can manage all of their loans at the same time and in the same place.

o Many borrowers have more than one loan, each with its own terms, conditions and servicers. A one-stop-portal would help students keep track of all of their loans, total indebtedness and repayment status.

• Prevent servicers from branding communications with borrowers.

o Having ED as the only brand on communications could help legitimate loan correspondence and lead students to take each communication more seriously.

• ED needs to offer standard consumer protections for student borrowers such as those offered with mortgages, credit cards and car loans.

o Protections could include standardized processes for statements and payment handling, server transfers, error resolution and delinquency servicing.

• Leverage innovative technologies to help servicers communicate with borrowers more efficiently.

o The ability to use data more effectively could help identify borrowers truly at risk of defaulting.

o Loosening of current due diligence requirements would allow servicers to disseminate disclosures at optimal times for individual borrowers.

• Entrance and exit counseling requirements should be incorporated into the Financial Awareness Counseling Tool (FACT).

o The FACT, created and recommended by ED, but not required, boasts a good number of innovative and comprehensive features that provide borrowers with a better understanding of their loan portfolio. FACT can help borrowers formulate a repayment plan and demonstrate the effects of reducing overall debt.

• Create a policies and procedures manual for servicing.

o A manual would make training, communication and borrowing consistent across servicers and help standardize processes in borrowing. For instance, it could lessen the frequency of forbearance by ensuring that all students receive standardized communication regarding their repayment options.