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Education Department ditches plan to use single student loan servicer

By Danielle Haynes
Education Secretary Betsy DeVos on Tuesday announced the department is ditching plans to go to a single student loan servicer and will instead implement a new system. Photo by Pat Benic/UPI
Education Secretary Betsy DeVos on Tuesday announced the department is ditching plans to go to a single student loan servicer and will instead implement a new system. Photo by Pat Benic/UPI | License Photo

Aug. 1 (UPI) -- The Department of Education said Tuesday it is scrapping plans to scale back the number of contractors that collect student loan debt amid opposition from both Democrats and Republicans in Congress.

The Trump administration in May said it planned to walk back an Obama-era change that sought to offer greater consumer protections to student loan borrowers. At the time, Education Secretary Betsy DeVos said the system of using multiple companies collecting some $1.2 trillion in outstanding debt created a chaotic system.

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But the plan to use one servicer is over as the department seeks to establish a single data processing platform to house all loan information while allowing customer account servicing to be handled by one or multiple contract services.

DeVos said she hired A. Wayne Johnson as chief operating officer to modernize the process.

"To improve customer service, we will take the best ideas and capabilities available and put them to work for Americans with student loans," Johnson said. "When FSA customers transition to the new processing and servicing environment in 2019, they will find a customer support system that is as capable as any in the private sector. The result will be a significantly better experience for students -- our customers -- and meaningful benefits for the American taxpayer."

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On Monday, Sen. Roy Blunt, R-Mo., introduced legislation to cancel the Education Department's original plan to use a single student loan servicer. Sens. Elizabeth Warren, D-Mass., and James Lankford, R-Okla,, co-sponored the bill.

"Maintaining choice and competition amongst student loan servicers is the best way to ensure they will continue improving services for student borrowers," Blunt said in a statement.

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