The Department of Education planned this month to begin reshaping the role of private debt collection firms in handling student loans by pulling defaulted borrower accounts from a handful of large private contractors.
Lawmakers who control the department’s budget had other ideas.
After a recent Senate spending package warned the department against dropping the debt collectors, the plan is on hold. And it’s not clear how those companies will figure into the Trump administration’s proposed overhaul of student loan servicing.
Private loan servicers handle payments from borrowers on their student loans and provide information on payment plan options. When borrowers go more than 270 days without making a payment on their loans, they are considered to be in default. Those companies are tasked with collecting on more than $84 billion in defaulted student loan debt.
Dexter McCoy knew that going to college was the right decision for his future, but after graduating this spring from Boston University, he has something else on his mind: repaying about $30,000 in student loans.
Far too many American students, like Dexter, and their families are worried about paying for college or are struggling with student loan payments. Over the past five years, the Administration has been listening to students tell their stories and has taken steps to help – including increasing the maximum Pell Grant by about $1,000 and providing loan repayment options like Pay As You Earn, which caps monthly payments at an amount that based on how much you’re making so student loan bills are more manageable.