A new National Consumer Law Center (NCLC) report analyzes a Unified Servicing and Data Solution (USDS) contract, set to go live in the spring, and its potential impact on student loan borrowers’ rights and experiences.
Alpha Taylor
“The USDS contract presents a better servicing environment for borrowers and offers significant oversight and financial disincentives to reduce servicer misconduct and errors,” said Alpha Taylor, staff attorney at the National Consumer Law Center and author of the report. “The financial disincentive under USDS — particularly the risk of losing revenue for failing to provide quality service to borrowers, if effectively monitored and not watered down — offers some meaningful protection against systemic servicing problems.
Taylor said that while some provisions of USDS will be straightforward to implement and assess, there are several murkier provisions. Also, how the Office of Federal Student Aid implements and oversees them will significantly impact their effectiveness in ensuring quality loan servicing.
“If appropriately funded and implemented, USDS will improve the servicing environment for borrowers,” said Taylor. “Congress must approve the department’s request for additional funding if they want a realistic shot at effective implementation.”
Under USDS, the education department seeks to create a centralized loan servicing environment that will increase its ability to perform effective oversight and meet the needs of borrowers with aims to move full account management, branding, and repayment from the servicers’ websites to studentaid.gov, over the longer term.
The report found that, to ensure a successful transition to the USDS servicing environment, the education department must conduct rigorous oversight and penalize servicers who do not perform in accordance with the new contract.
Additionally, the report concluded that the department must ensure that the common borrower-facing information and applications that borrowers will be driven to under USDS are accurate, functional, accessible, and consumer-tested. It also must commit to transparency by finally making all servicer contract documents, including change requests and contract modifications, available to the public, and by resuming publication of data on servicer performance and new account allocations.
“In light of the long record of servicer misconduct, it is critical that the department commit to transparency and make public information regarding the changing terms of the USDS contract, servicers’ performance under the contract, and the Department's actions in response,” said Taylor. "This is not a situation in which the public can or should simply trust the department that the USDS contract is being satisfied and that servicers are performing well.”
