One of the biggest problems with government issued student loans is that the Department of Education doesn’t handle the day to day operations. The Department contracts with other companies for these tasks. Believe it or not, the Department of Education sends the majority of student loans to the same four major contractors to handle the day to day operations of the loan processing. Are there other companies besides these four? Yes, as a matter of fact there are.
Hmmm, if it seems to you that the Education Department has been playing favorites, you would be correct. The government is playing favorites by allowing these four companies a veritable monopoly on their contracts. Can you believe it? Shockingly, these four contractors also have the worst track record when it comes to allowing borrowers to fall behind on payments.
The reason why many borrowers fall behind on payments directly after graduation vary, but one major reason is a lack of customer service. Many new graduates do not know when loans are due, how to repay those loans, or what can be done if they fall behind on loans.
Better overall customer service is one answer to this problem. Another answer is to allow smaller contractors – with much better track records – to handle a bigger percentage of student loans.
A Move by Congress
Finally, this past December while much of the country was preparing for a long holiday break, President Obama signed a spending bill that will end the issuing of student loans directly to major contractors with poor customer service. Now, instead of sending the bulk of student loans to those four major contractors, the Department of Education will have to include smaller contractors as well – in other words, all contractors are now allegedly equal.
What will the outcome be? Interestingly, most of those smaller contractors have a much better record of preventing students from defaulting simply due to better customer service. Those smaller contractors spend more time (as a rule) focused on borrowers that are about to default, and on helping new graduates understand repayment schedules and options.
Additionally, this new government law will force larger lenders to take more care when handling student loans, which might be one of the best outcomes of the new law.
What This Means for You
The Department of Education has until March 1 of this year (2016) to comply with the new law. This means that you may find (if you have government loans) better overall customer service, more customized solutions to your loan problems, and help when it comes to figuring out what you can and can’t do with your student loans. You may also be dealing with a smaller contractor in the new year.
The Department of Education does argue that the smaller contractors have better track records simply because they deal with graduates that aren’t delinquent, but this line of defense is debatable (and is being debated). In the end, all of this is great news for graduates with government issued student loans – and for those smaller contractors that did not get a fair shake prior to the new law.
It’s completely understandable that you may have fallen behind where your student loans are concerned – and rest assured that it does happen to many graduates. If this is the situation that you are currently facing, now is a great time to contact a qualified lawyer and get some advice on your next steps.