Amid various complaints aimed at federal student loan servicers, the U.S. Education Department (ED) plans to allow borrowers to make payments directly to the government.
One of the Obama Administration's most prominent campaigns has been higher education reform, such as the highly divisive rating system. But now the ED is turning its attention toward companies that manage federal student loans on the government's behalf.
"[The ED] will implement a single Department of Education student loan portal for all borrowers... hoping to make things clearer, simpler and less confusing for every borrower," The Huffington Post quoted Education Undersecretary Ted Mitchell saying at an address in Las Vegas on Tuesday.
The ED has somewhat of a complicated recent history with student loan servicers. Under Arne Duncan's supervision, the ED faced some scrutiny for continuing to commission servicers accused of violating federal laws for U.S. Military servicemembers.
The ED's student loan servicers have also fielded complaints for using misleading tactics aimed at incurring additional fees and interest on payments. In September, The Consumer Financial Protection Bureau released a report detailing such complaints.
"With one out of four student loan borrowers struggling to repay their loans or already in default, cleaning up the servicing market is critical," CFPB Director Richard Cordray said in a news release. "Today's report underscores the need for market-wide student loan servicing reforms to halt harmful practices and boost assistance for distressed borrowers."
In addition to his plan to better appropriate federal funds to colleges (the yet-to-be-implemented ratings system), President Obama detailed a "Student Aid Bill of Rights" in March. The fourth point in that plan is essentially what the CFPB wants to rectify, and what Mitchell addressed Tuesday.
