May 20 (UPI) — The Department of Education said Friday it will scale back the number of contractors that collect student loan debt from nine to one in an effort to revamp the “cumbersome and confusing” current system.
The move walks back an Obama era change that sought to provide greater consumer protections to student loan borrowers. U.S. Secretary of Education Betsy DeVos said the current system of a multitude of companies collecting the some $1.2 trillion in outstanding debt created a chaotic system.
“The federal student loan servicing solicitation we inherited was cumbersome and confusing—with shifting deadlines, changing requirements and de-facto regulations that at times contradicted themselves. Internal and external stakeholders both agreed it was destined for a massive and unsustainable budget overrun,” she said.
Devos said the move simplifies the loan collections process and will save taxpayers some $130 million in the next five years.
“Savings are expected to increase significantly over the life of the contract. Borrowers can expect to see a more user-friendly loan servicing interface, shorter email and call response times and an improved payment application method that will maximize the benefit of each payment the borrower makes. Our amendment makes no changes to repayment plan requirements.” she said.
In April, Devos rescinded policy memos that sought to strengthen consumer protections for borrowers, a move that drew backlash from consumer groups and others.