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.