A trio of Democratic senators sent a letter to Education Secretary Miguel Cardona on Monday outlining concerns they have about upcoming changes to student loan servicing.
The Department of Education is in the process of creating a centralized Federal Student Aid (FSA) servicing platform for all federal loans, calling it the Unified Servicing and Data Solution (USDS) system.
“While we applaud the Biden administration’s efforts to modernize and improve student loan servicing, a preliminary analysis of publicly available information about this transition suggests this new system lacks transparency,” said Democratic Senators Elizabeth Warren (Mass.), Ron Wyden (Ore.) and Chris Van Hollen (Md.) wrote in their letter. “As a result, it will be difficult for borrowers and the federal government to hold service providers and service providers accountable, including the business process operations (BPO) providers that support account service providers.”
The biggest concern of the three is the work being done to get loans labeled under a “single FSA brand,” referred to as “white labeling.”
The senators use the definition of white labeling given by the Student Borrower Protection Center, which states: “white labeling interferes with the ability of regulators and individual borrowers to hold these companies accountable for service failures. When contractors provide low-quality services because their actions are labeled as those of government agencies, their responsibility is obfuscated and blame is diverted to the agency.”
The senators also say it could make it difficult for borrowers to report wrongdoing to the Consumer Financial Protection Bureau, which holds contractors accountable when they make mistakes or harm borrowers.
Democrats are requesting information about contracts with companies under this new plan, how borrowers will be able to handle complaints and what future plans are for the transition.
“[C]The association of single-brand or single-brand loan officers with the FSA and allowing BPO providers to operate quietly without being identified as individual companies threatens to create confusion for borrowers and can lead to a lack of oversight and accountability for errors by service providers”, they stated. “The FSA must incorporate strong transparency features that allow borrowers to identify the servicer responsible for their loan and hold that entity accountable.”
This story originally appeared on thehill.com read the full story
