DeVos Abandons Plan to Consolidate Student Loan Servicing

In Education On
- Updated

Education Secretary Betsy DeVos on Tuesday scrapped a plan to overhaul the government’s system for collecting payments on $1.3 trillion in federal loans, canceling a contract procurement that would have handed management of nearly all aspects of the system over to a single vendor.

Ms. DeVos said in May that the department would stick with that approach, but with one major change: It wanted a single company to both build the new system and have the option of servicing all of the loans itself. Putting the entire project in one vendor’s hands would be “more effective and efficient,” she said at the time.

But the department’s winner-take-all plan prompted a broad outcry from consumer advocates, lawmakers, and even the industry itself, which is accustomed to splitting up the government’s lucrative contracts for student loan collection among a number of entrenched vendors.

A bipartisan group of senators introduced legislation on Monday to block the Education Department from moving all federal student loans to a single company.

Roy Blunt, a Missouri Republican, said that legislative action was needed to “prevent any one student loan servicer from becoming so large it poses a risk to taxpayers.” He was joined by another Republican, James Lankford of Oklahoma, and two Democrats, Jeanne Shaheen of New Hampshire and Elizabeth Warren of Massachusetts.

“Maintaining choice and competition amongst student loan servicers is the best way to ensure they will continue improving services for student borrowers,” Mr. Blunt said in a statement. He called the department’s change of course “a step in the right direction.”

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