FSA Changes Course towards Simplified Loan Servicing

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According to people familiar with the matter, the Office of Federal Student Aid has canceled an appeal to providers to undertake an interim upgrade of their student loan service.

FSA presented Temporary service solution, or ISS, last fall as part of FSA Next Generation Initiative to provide a bridge between the existing student loan service system and a single redesigned website. There are currently nine different pre-default lending institutions, each with their own website, contact center, and staff training. ISS had to reduce this number to two suppliers, who would take on all the same responsibilities as existing service centers.

IN Congressional Year-End Budget Agreement took place in december several clauses are included related to the ISS request, including the prohibition to allow the Minister of Education to provide funding for any work related to the development of a new loan servicing system that does not include multiple service providers who contract directly with the Ministry of Education. After the FSA considered the impact of the provisions, it decided to cancel the ISS request.

The FSA plans to work with the leadership of the Biden administration to refine its long-term operating strategy for servicing loans. It is unclear what their next steps will be and when they will be taken.

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