“It just makes things a lot easier to keep track of as a borrower and you’ll know where you stand,” she said.
The government will still hold the financial responsibility of lending money to students and families for school. However, once a servicing contractor is selected, that company will be the primary entity that borrowers go through.
“If that loan servicer doesn’t do its job well that could be a problem,” Robinson said. “There could be a lot of complaints from borrowers, but that’s an 'if.' It’s not a certainty that that will be the case. They’ll just have to be very careful when they choose which loan servicer is going to have all of these loans.”
The Department of Education will accept detailed plans through July from bidders looking to be the government’s exclusive student-loan servicing contractor, and this plan will go into effect in 2019, when the current plan expires.
Under this new amendment, undergraduate students will be offered one choice for an income-based repayment plan, which requires students to pay 12.5% of their discretionary income for 15 years. According to Robinson, this will make repayment easier to manage.
The department’s proposal also amends the public service loan forgiveness program, which was formed under the Bush administration and carried out under the Obama administration.
The public service loan forgiveness program promises to cancel student debt for those who work for the government or nonprofit organizations if they can make on-time payments for 10 years. This can apply to teachers, law enforcement officers and a wide variety of careers.
Jay Schalin, the director of policy analysis for the James G. Martin Center, said the people who benefit from this program often use it for a graduate degree rather than financial issues.
According to the federal student loan report, approximately 40 percent of the student loan debt total is accounted for by those taking out loans for graduate school.
According to the Department of Education, the plan is estimated to save taxpayers over $130 million in the first five years of the contract. However, in a country where approximately 70 percent of college students are student loan borrowers, the proposal will likely face intense scrutiny from the public.