According to the article “Petition opposing DeVos student loan overhaul gets 18K signatures” released by The Hill on Monday, there is currently a petition being circulated by Care2 that is asking Betsy DeVos not to consolidate Federal Student Loan Providers. Currently, there are nine different student loan providers: Cornerstone, HESC/Edfinancial, Granite State, MOHELA, OSLA Servicing, FedLoan Servicing, Great Lakes, Navient, and Nelnet—the latter four being the largest of the group.
The Trump Administration wants to offer an exclusive contract that will give a single company the right to service all federal student loans. DeVos said that “streamlining will save money and increase efficiency.” But many critics, including those who have signed the above-mentioned petition, are nervous of the consolidation because they argue that this single company will no longer have any incentive to provide better customer service. DeVos goes on to say that this single service provider “will establish a user platform and a standardized process for handling customer calls.” However, Natalie Abrams, executive director of the advocacy group Student Debt Crisis, said, “with zero competition, we are concerned about a ‘too big to fail’ student loan company that has zero incentive to work for students, borrowers, and their families.”
The petition is also asking DeVos not to do away with the requirement that servicers notify borrowers a couple of weeks in advance when they need to re-certify their income-driven repayment plans. If this goes away, many are worried that this single service provider may not notify borrowers, causing their monthly payments to go up significantly. Although this single service provider may, in fact, decide to notify borrowers ahead of time, those who are signing the petition are worried that they may choose not to because of the money that is at stake.
In response to the Trump Administration’s proposed changes, Rohit Chopra, senior fellow at the Consumer Federation of America and former CFPB assistant director, stated that “the changes will certainly increase profits for the industry, but will do nothing to tame the high levels of default in the program.” In 2016 alone, 8 million borrowers gave up paying their debt, with 1.1 million people defaulting, according to the article “A Record Number of People Aren’t Paying Back Their Student Loans.” The total amount of defaulted student loan debt rose by roughly 14% in 2016, and it would seem that that number could continue to rise if a solution is not established.
