Trump to offer exclusive contract to service U.S. student loans

By Lisa Lambert

WASHINGTON (Reuters) – President Donald Trump’s administration will soon offer an exclusive contract that will give one company the right to service billions of dollars of outstanding federal student loans now handled by four companies, officials said on Friday.

The U.S. Education Department, led by Trump pick Betsy DeVos, said the streamlining will save money and increase efficiency. But critics said student borrowers could suffer because a single company would be granted a monopoly, with no incentive to provide better customer service.

The Trump approach would represent one more radical change for the financial aid system that former President Barack Obama overhauled. Under Obama, a Democrat, much of the $1.3 trillion business of student lending was moved from banks and other companies to the federal government.

Four companies still handle servicing the loans. Navient Corp <NAVI.O>, which was spun off Sallie Mae <SLM.O> in 2014, is the largest. Its stock rose 23 cents to close at $13.94, after popping to a session high of $14.14 shortly after the announcement. The others are Nelnet Inc. <NNI.N>, Great Lakes Educational Loan Services, Inc, and FedLoan Servicing, also called PHEAA. Nelnet’s stock closed down 0.5 percent on Friday.

The Consumer Financial Protection Bureau, a consumer financial watchdog agency, is fighting Navient in court over allegations the company deceived borrowers about repayment options and their rights.

In an op-ed piece published on the Wall Street Journal website Friday afternoon, DeVos wrote the Obama administration’s servicing requirements created a “chaotic system” that generated numerous consumer complaints and was not sustainable.

She added the single servicer will establish a user platform and a standardized process for handling customer calls.

But Natalia Abrams, executive director of the advocacy group Student Debt Crisis, said Obama’s plan to have servicing companies compete for federal contracts based on…

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