Center for American Progress

RELEASE: New CAP Column Warns of Looming Student Loan Servicing Crisis
Press Release

RELEASE: New CAP Column Warns of Looming Student Loan Servicing Crisis

Washington, D.C. — The Trump administration’s inability to complete a new student loan servicing competition could spell disaster for 33 million borrowers next year. A new column from the Center for American Progress reveals the looming crisis facing the federal student loan servicing system—brought on by nearly four years of cancellations, restarts, mismanaged congressional relationships, expensive distractions, and a procurement process that appears to hand infinite veto power to servicing companies that lose competitions.

At the end of the Obama administration, the U.S. Department of Education unveiled an ambitious proposal to transform servicing of federal student loans, using new technologies and platforms to uphold higher standards, stronger accountability, and more transparency for student loan servicers. Yet thanks to multiple cancellations, after nearly four years of work, the agency has a sandwich with no meat—a website for borrowers, improved outreach tools, and people to pick up the phone, but no servicing platform in place. Now, time is running out. With Education Department contracts expiring in December 2021, the next six to nine months will be a crucial time for ensuring the stability of the student loan servicing system.

The column notes that in many respects, it’s too late to undo much of the damage wrought by Secretary of Education Betsy DeVos’ approach—particularly, dithering in 2017 and 2018. However, Congress, as well as the next administration, can act to mitigate some of the worst effects by moving loan servicing to the mandatory part of its budget and by prioritizing helping students to repay loans rather than boosting servicing companies.

“The Trump administration had years to avoid the coming student loan servicing crisis,” said Ben Miller, vice president for Postsecondary Education at the Center for American Progress and author of the column. “Without quick action, the federal government risks having no system in place next year to help 33 million borrowers navigate their loans. This is a completely avoidable catastrophe that could lead to lapsed services, missed payments, or even delinquencies for borrowers.”

Please click here to read “The Looming Student Loan Servicing Crisis” by Ben Miller.

For more information or to speak with an expert, contact Morgan Finkelstein at or 202-478-5311.