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Direct Loan Servicing
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Ensure Fair and Equitable Treatment for All Direct Loan (DL) Servicers

+ EFC will work with Congress and the Department of Education to ensure fair and equitable treatment is provided to all Direct Loan servicers, and that new student loan servicing contracts are allocated based strictly on the performance metrics developed by the Education Department to evaluate federal student loan servicers. EFC is also advocating that borrowers be allowed to select not-for-profit (NFP) servicers when consolidating loans.

+ EFC organizations have invested a great deal of time, money, and resources into providing exemplary service to borrowers and the Department of Education. EFC Members that service federal student loans are driven by their nonprofit, public purpose missions to help students succeed in postsecondary education; their interests are inherently aligned with borrowers.

+ Currently, borrowers who choose to consolidate their Federal Direct Student Loans are limited in their choice of servicer to the four TIVA servicers. As a result, when a borrower who is working with one of the six not-for-profit servicers consolidates their loans, the servicing must be transferred to one of the four TIVA servicers. 
If a borrower is proactively engaging with their servicer and consolidating their loan, they should not be forced out of that existing, positive relationship. Allowing borrowers to choose the servicer that works best for their individual needs would decrease the overall anxiety of the repayment process and foster positive, standing relationships between borrowers and servicers. Allowing borrowers to choose such servicers for their consolidation loans will give more borrowers the service, choice, and efficient process that they deserve.

+ The FY16 Omnibus Appropriations Act contains the following language relating to allocation of borrower accounts:

“… the Secretary shall, no later than March 1, 2016, allocate new student loan borrower accounts to eligible student loan servicers on the basis of their performance compared to all loan servicers utilizing established common metrics, and on the basis of the capacity of each servicer to process new and existing accounts.”

+ Additionally, EFC recommends that nonprofit and state-based student finance organizations be designated as small businesses under U.S. Small Business Administration guidelines for purposes of contracting with the Department of Education.