A critical new report from the U.S. Department of Education’s Office of Inspector General finds the department’s student loan unit failed to adequately supervise the companies it pays to manage the nation’s trillion-dollar portfolio of federal student loans. The report also rebukes the department’s office of Federal Student Aid for rarely penalizing companies that failed to follow the rules.
Instead of safeguarding borrowers’ interests, the report says, FSA’s inconsistent oversight allowed these companies, known as loan servicers, to potentially hurt borrowers and pocket government dollars that should have been refunded because servicers weren’t meeting federal requirements.
“By not holding servicers accountable,” the report says, “FSA could give its servicers the impression that it is not concerned with servicer noncompliance with Federal loan servicing requirements, including protecting borrowers’ rights.”
WASHINGTON—Today, U.S. Secretary of Education Betsy DeVos announced her intent to transform how Federal Student Aid (FSA) provides customer service to more than 42 million student loan borrowers.
“The FSA Student Loan Program represents the equivalent of being the largest special purpose consumer bank in the world,” said Dr. A. Wayne Johnson, the new Chief Operating Officer of Federal Student Aid (FSA). “To improve customer service, we will take the best ideas and capabilities available and put them to work for Americans with student loans. When FSA customers transition to the new processing and servicing environment in 2019, they will find a customer support system that is as capable as any in the private sector. The result will be a significantly better experience for students – our customers – and meaningful benefits for the American taxpayer.”
Today, for the first time, the U.S. Department of Education released data showing the typical earnings of graduates of the thousands of career training programs offered by colleges across the country. This release continues the Obama Administration’s efforts to help students make more informed decisions about college enrollment and to protect students from career training programs that lead to poor outcomes yet receive taxpayer-funded federal student aid. Today’s release is a major step towards spotlighting the outcomes of students attending career college programs, providing critical information for the more than 1.3 million students currently enrolled as well as prospective students searching for a quality career college opportunity.
“For far too long, some career colleges have made dubious promises about the employment prospects of their graduates, promising high salaries that rarely live up to the hype. Americans who are working hard to get the knowledge and skills they need to succeed in the growing economy deserve better, accurate information,” said U.S. Under Secretary of Education Ted Mitchell. “The earnings data released today shine a light on how graduates are actually faring when they enter the job market, and will ensure students don’t make decisions based on too-good-to-be-true promises.”
The U.S. Department of Education today announced an important step forward in the Obama Administration’s efforts to strengthen the student loan servicing experience for borrowers. Federal Student Aid issued the next phase of its procurement to acquire a single servicing platform to support the management of loan repayment for the more than 30 million Americans with student loan debt serviced by the Department of Education. The solicitation details the specific requirements the selected contractor must fulfill when developing the servicing platform.
“Borrowers deserve access to the right information from their servicers as they make important decisions about managing loan repayment, ultimately paying off their debt and climbing the economic ladder,” said U.S. Secretary of Education John B. King Jr.“Today’s announcement builds on our ongoing effort to simplify and improve the borrower experience.”
As part of a continued effort to implement a new vision for student loan servicing that ensures the more than 40 million Americans with student loan debt get high-quality customer service and fair treatment as they repay their loans, the U.S. Department of Education today outlined a series of enhanced protections and customer service standards that will guide the future of federal student loan servicing practices. The policies were outlined in a memorandum from U.S. Under Secretary of Education Ted Mitchell to Federal Student Aid (FSA), which will implement the policy directives to strengthen student loan servicing during the ongoing procurement process. These policies were developed in consultation with the U.S. Department of the Treasury (Treasury) and the Consumer Financial Protection Bureau (CFPB).
“Today’s policy directive is a big win for tens of millions of borrowers,” said U.S. Secretary of Education John B. King Jr. “It will help ensure that student loan borrowers get the service they deserve.” While the majority of federal student loan borrowers continue to successfully repay their student loans, there are still too many borrowers who are struggling, or who may be at risk of defaulting on their loans. Since taking office, President Obama and his Administration have worked hard to keep college affordable and help student loan borrowers manage their debt. In March 2015, as part of that effort, the President unveiled a Student Aid Bill of Rightsdirecting federal agencies to work together on a series of actions to help borrowers manage their student debt.
As part of the Obama Administration’s continued commitment to ensure that defrauded students have a path to debt relief with minimal burden, Special Master Joseph A. Smith has delivered his fourth and final borrower defense progress report to the U.S. Department of Education.
“Joe has shown tremendous leadership, thoughtfulness and insight during his tenure as Special Master,” Under Secretary of Education Ted Mitchell said. “All of us at the Department are grateful for his diligence in support of our efforts to provide debt forgiveness to students who have been mistreated and defrauded by predatory institutions.”
The report details the numbers and status of borrower defense claims and the Department’s continued efforts to reach former Corinthian College students who may be eligible for relief based on Department findings of school misconduct. Additionally, the report describes the creation of a new application form to facilitate borrower defense discharge claims. The Department’s Student Aid Enforcement Unit, located within Federal Student Aid (FSA), will oversee the borrower defense program, and will continue to provide periodic progress reports. The Enforcement Unit was established in February to respond more quickly and efficiently to allegations of illegal actions by postsecondary institutions. All reports will be made public.
The U.S. Department of Education’s Federal Student Aid Office (FSA) today posted a series of updates to its data center, a collection of key performance data on the federal student aid portfolio. The updates, which continue the Department’s commitment to greater transparency on the federal student loan portfolio and other key financial aid metrics, include school district-level Free Application for Federal Student Aid (FAFSA) completion rates and the total fiscal year-to-date dollar amount recovered in defaulted student loans by guaranty agency and collection type.
“Though students ultimately make the choice to attend college, no one makes the journey to college alone,” said U.S. Secretary of Education John B. King Jr. “It is up to all of us to make the dream of a college education more accessible for more families by removing roadblocks to college and giving borrowers options to help manage their debt. The latest updates to the FSA Data Center, which for the first time offer district-level FAFSA completion data and state-level maps, serve as additional tools for schools and families to help students go to college.”
If you’re a parent of a college-bound child, the financial aid process can seem a bit overwhelming. Who’s considered the parent? Who do you include in household size? How do assets and tax filing fit into the process? Does this have to be done every year? Here are some common questions that parents have when helping their children prepare for and pay for college or career school:
Why does my child need to provide my information on the FAFSA®?
While the federal government provides nearly $150 billion in financial aid each year, dependency guidelines for the FAFSA are determined by Congress. Even if your child supports himself, he may still be considered a dependent student for federal student aid purposes. If your child was born on or after January 1, 1992, then he or she is most likely considered a dependent student and you’ll need to include your information on the Free Application for Federal Student Aid (FAFSA).