Modernizing Federal Student Loan Servicing

By: Richard Cordray, Chief Operating Office, Federal Student Aid, U.S. Department of Education

This spring, Federal Student Aid (FSA) will begin improving how individual borrowers manage and repay their federal student loans. Through multiple phases, we will bring online an entirely new federal student loan servicing environment – a goal we have pursued for more than a decade. We are excited to reach this important milestone.

Loan servicers are companies that handle the billing and other services on federal student loans on behalf of FSA, even though the U.S. Department of Education still owns these loans. Borrowers utilize their servicer’s website to make payments on their student loans and contact servicers directly with questions about their loan payments or bills.

The new environment, known as the Unified Servicing and Data Solution (or USDS), will improve the experience and repayment outcomes for 38 million federal student loan borrowers. It also will enable FSA to provide tighter oversight of loan servicers and better safeguard borrowers’ personal information through higher cybersecurity standards.

Borrowers will begin to see changes this month, with more to come throughout the year. With that in mind, here is more information about the “what” and “why” of the new loan servicing environment.

What is the new loan servicing environment?

Before this spring, federal student loan servicers had old contracts, which were largely unchanged over many years. FSA has now awarded new servicer contracts to modernize and enhance the experience for all borrowers in several specific ways:

• · All borrowers will see a more user-friendly and streamlined web experience, regardless of their servicer. Servicer websites are being updated with more consistent branding and other features.

• As we continue our improvements, borrowers will be able to more easily navigate between StudentAid.gov and their servicer’s website using single sign-on functionality so borrowers can navigate their accounts more easily.

• The new environment makes it easier for FSA to monitor servicer performance to ensure that they process forms and take other actions on a timely basis.

• Account management capabilities will eventually be centralized on StudentAid.gov, further simplifying the process for borrowers to manage and repay their federal student loans.

• Increased accountability for servicers will incentivize servicers to keep borrowers in current repayment rather than in forbearance or deferment, reducing delinquencies and defaults.

• Enhanced cybersecurity standards will better protect borrower accounts against cyber threats and fraudulent actors.

Why will these changes benefit borrowers?

Starting this month, borrowers will begin to see updates to their web experience as they manage their student loans. The loan servicer websites and email addresses will change from “.com” to “.gov” URLs and the websites will be updated to include additional FSA branding to make them more consistent.

These changes will also help borrowers distinguish authentic information about their student loans from scams.

Later this year, FSA will further simplify and improve the web experience for borrowers. Right now, borrowers must keep track of two separate account usernames and passwords—one for StudentAid.gov and another to access their servicer’s website. As FSA rolls out new single sign-on functionality, borrowers will use only their StudentAid.gov account username and password to seamlessly log in to both StudentAid.gov and their servicer’s website to access all their important federal student loan information. Finally, as further enhancements are implemented in the coming years, all this functionality will reside on StudentAid.gov, rather than on the servicers’ websites.

Federal student loan borrowers are already hearing from FSA about these upcoming changes. We will continue to communicate about all the forthcoming changes via updates to StudentAid.gov, emails, text messages, and social media posts.

Our goal at FSA is fixing this broken system and improving the experience for student loan borrowers. We will keep you informed about the many changes underway to improve outcomes, hold servicers accountable, and simplify the process of managing and repaying federal student loans.