According to a recent article from the Wall Street Journal, Deputy Treasury Secretary Sarah Bloom Raskin says companies handling student loan payments need to do more to help borrowers. Raskin referred to “poor servicing tactics,” including firms not providing enough flexibility to borrowers in case of financial trouble, as well as charging extra late fees during the grace period.
Give a Little Grace
Raskin said, “We know the importance of servicers informing borrowers and guiding them through the process of identifying the best repayment options. Yet we also know that absent proper supervision, enforcement and well-structured incentives, servicers can fall far short performing these functions well.”
Currently, the Education Department is in the process of revamping its contracts with debt collectors for student payments. Ultimately, for Raskin, the call for federal student loan debt collectors is to aid in removing loans for default and dealing more fairly with borrowers. One way to implement these changes is to put incentive structures in place, clearly outlining them in debt collector contracts.
The current presidential administration has also spoken out about the need to address increasing student loan debt, as well as borrowers’ struggles in paying them back. The education department, however, has noted a decrease in defaults, with a 14.7% rate of borrowers defaulting in fiscal year 2010 and 13.7% of borrows defaulting in fiscal year 2011.
On all fronts, the hope is for more decreases in defaults in the future. Administrators believe student loan servicers can provide the flexibility and support to help this process move forward.