GAO Calls for Servicer Communication Overhaul to Improve Student Loan Health

student loanThe Government Accountability Office (GAO) has just released a report called “Federal Loans: Education Could Improve Direct Loan Program Customer Service and Oversight.” The  June 15th report is part of the office’s study into the Department of Education’s oversight into the Federal Direct Loan program.

In this report, the GAO reviewed Education contracts as well as United States Department of Education monitoring plans, policies, procedures, and overall guidance in relation to loan servicers, loan servicer websites, borrower communication samples, customer satisfaction surveys, and performance reports.

This new report appears to outline the concern that borrowers appear to have limited access to telephone communications with their assigned loan services to manage their accounts.  Unfortunately—at least, for the program—the Department of Education’s 2014 and 2015 borrower satisfaction survey revealed similar commentary.

According to the report, “Education’s lack of a minimum standard for servicer call center hours, and the limited hours currently provided, impede student loan borrowers access to costumer service that is responsive to their needs and puts them at a greater risk of delinquency and default.”

In addition the report also notes that the US Department of Education does not have a systematic approach for receiving borrower complaints—this includes those complaints which have been received through loan servicers—and that the DoE’s performance metrics and compensation structure for servicesr “can sometimes hinder [the Department of] Education’s strategic goals of providing superior customer service and ensuring program integrity.”

It is important to note that these performance metrics and compensation structures are, in fact, based on borrower loan status. And, also important, by the end of 2015, nearly 20 percent of all student loan borrowers were considered to be delinquent. Delinquent—as defined by the US Department of Education—means more than 30 days behind on student loan payments (regardless of the reason, which could including not having the money to pay, not having the desire to pay, or some confusion about their repayment program).

As such—and as you might expect, then, the US Government Accountability Office now recommends that the US Department of Education:

  • Establish, at the very least, minimum standards for servicer call center hours that will allow for more access
  • Ensure that the complaint tracking system sufficiently catalogs comprehensive and comparable, pertinent information from those servicers in regards to the nature and the status of loan borrower complaints
  • Analyze and modify any performance metrics and compensation as needed.