December 9, 2023


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Education Department Announces Major Overhaul Of Student Loan Servicing

Education Department Announces Major Overhaul Of Student Loan Servicing

The U.S. Department of Education announced a major overhaul of student loan servicing.

Here’s what you need to know — and what it means for your student loans.

Student Loans

The Education Department said Thursday that more than 35 million student loan borrowers can expect a “21st-century customer experience” when it comes to their student loans. Federal Student Aid, the largest provider of financial aid for college in the U.S., has posted the solicitation for the Unified Servicing and Data Solution (USDS), which is intended to act as a long-term student loan servicing solution for federal student loan borrowers. Specifically, the USDS will seek to hold student loan servicers accountable with clear performance objectives such as reducing student loan borrower default and student loan delinquency. Specifically:

  • six loan servicers support student loan borrowers during student loan repayment;
  • student loan servicers operate independent websites, have independent staff and communicate individually with student loan borrowers;
  • given the lack of a centralized platform, student loan borrowers may have different customer service experiences, which can be confusing; and
  • as a result, student loan borrowers often receive inconsistent or incorrect information on potential student loan repayment options, which can result in student loan default.

This latest announcement is part of a broader, ongoing initiative within the Biden administration to simplify student loan repayment, increase student loan forgiveness and hold student loan servicers to a higher standard. (Student Loan Forgiveness: 5 Key Takeaways From Major Announcement).

Student loans: how this new system will help student loan borrowers

The new customer service platform is intended to help student loan borrowers in several ways, including:

  • replace legacy student loan servicing contracts for both Direct Loans and federally-managed FFELP Loans;
  • offer federal student loan borrowers complete management of their student loans through;
  • provide a more seamless transition during student loan account transfers;
  • augment accountability for student loan servicers through measurable benchmarks; and
  • use oversight of student loan servicers to reduce student loan delinquency and student loan default.

Student loan servicers: what changes student loan borrowers should expect

Current student loan servicing contracts expire in December 2023. Federal Student Aid expects to decide on new student loan servicers this winter, with new servicers starting when the current contracts expire. Student loan borrowers can expect several changes to student loan servicing over the coming years, including:

  • major updates to technology, processes and operations to improve the user experience and outcomes for students, parents and student loan borrowers;
  • USDS student loan servicers will manage the student loan platforms, contact centers and manual processing activities for student loans;
  • customer service for the Public Service Loan Forgiveness program, TEACH Grants and total and permanent disability (TPD) discharge will be moved to and Federal Student Aid’s Business Process Operations vendors;
  • USDS student loan servicers will co-brand with Federal Student Aid, including a single sign-on student loan borrower interface with an Federal Student Aid ID;
  • within five years of the go-live date, FSA will move full account management, branding, and student loan repayment away from USDS student loan servicers’ websites;
  • eventually, student loan borrowers will manage their federal student loans “through a single, FSA-branded interface”;
  • student loan borrowers will then be able to manage all aspects of their federal student loans on Federal Student Aid, including completing the Free Application for Federal Student Aid (FAFSA®) and paying student loans.

They will be able to manage their entire student aid experience, from completing the Free Application for Federal Student Aid (FAFSA®) form to successfully repaying their loans, on The Education Department is focused on simplifying student loan management and student loan repayment while improving customer service and student loan borrower outcomes. That said, the best way to manage your student loans is not to have them. With student loan payments set to restart soon, here are some ways that you can pay off student loans faster:

Student Loans: Related Reading

Navient agrees to cancel $3.5 million of student loans

How to qualify for $17 billion of student loan forgiveness

Bill Maher: Student loan forgiveness is a “loser” issue

Education Secretary suggests student loan payments will restart