Posted Date: August 28, 2009

Author: Jana Hernandes, Service Director, Operations, Federal Student Aid

Subject: Loan Servicing Information - Transition to Additional Servicer Support Planned for September 2009

Earlier this year, we communicated customer service information for William D. Ford Federal Direct Loan (Direct Loan) Program loans and Federal Family Education Loan (FFEL) Program loans that the Department of Education (the Department) purchases from FFEL loan holders. As explained in those communications, to date we have had one servicer for Direct Loan Program loans and one servicer for FFEL Program loans purchased by the Department. In June 2009, we announced the award of four additional servicer contracts.

This announcement is the first in a series of announcements through which we will explain our transition to additional servicer support, provide customer service contact information for our servicers, and inform the community of Federal Student Aid resources available to support the servicing-related needs of borrowers and schools.

In this announcement, we will explain our transition to additional servicer support. We present the information in this announcement as follows:

  • Overview of New Servicing Approach

  • Servicing of FFEL Purchased Loans Beginning September 2009 (multiple subsections)

  • Additional Announcements and Contact Information

Overview of New Servicing Approach

As explained above, the loans that we currently service fall into the following two categories:

  • Direct Loans – These loans are made by the Department under the Direct Loan Program. We service the loans originated and disbursed by schools that participate in the Direct Loan Program. Upon “booking” of a Direct Loan, the Department corresponds with the borrower about the servicing of his or her loan.

  • FFEL Purchased Loans – These loans are made under the FFEL Program by FFEL lenders and subsequently purchased by the Department. Through methods commonly referred to as a “PUT” by FFEL loan holders and the Department, the Department becomes the owner of the loan and assumes all servicing responsibilities for the purchased loans. Upon purchase of a loan by the Department, both the prior FFEL loan holder and the Department correspond with the borrower about the purchase and servicing of his or her loan.

To date, we have serviced Direct Loans through the Direct Loan Servicing Center and FFEL Purchased Loans through the Department of Education Student Loan Servicing Center. In September 2009, we will add four new servicers to our team. These servicers will begin by servicing FFEL Purchased Loans. Later, these servicers may be assigned any Title IV financial assistance debt for servicing.

Beginning in September 2009, Direct Loans and FFEL Purchased Loans will be serviced as follows:

Loan Category Servicer
Direct Loans Direct Loan Servicing Center
FFEL Purchased Loans Department of Education Student Loan Servicing Center (ACS)
FFEL Purchased Loans FedLoan Servicing (PHEAA)
FFEL Purchased Loans Great Lakes Educational Loan Services, Inc.
FFEL Purchased Loans Nelnet
FFEL Purchased Loans Sallie Mae

Servicing of FFEL Purchased Loans Beginning September 2009

We plan to begin assigning FFEL Purchased Loans to our four new servicers—FedLoan Servicing, Great Lakes Educational Loan Services, Inc., Nelnet, and Sallie Mae—in early September 2009. Each year, we will measure the performance of these servicers in the areas of customer satisfaction and default aversion. We will then use these results to determine each servicer’s allocation of ongoing loan volume.

Customer Satisfaction Ensures Superior Service

We will measure the customer satisfaction for each servicer exclusively through the administration of customer satisfaction surveys. An independent vendor will conduct quarterly surveys of borrower, school, and Federal Student Aid customers on our behalf. We value the participation of all customers in the loan servicing process and will use the input we receive through the surveys to allocate loan volume and assist in ensuring that all servicers provide superior service to our customers.

Borrower-Centric Assignment Ensures Seamless Service

Our goal in implementing this multi-servicer approach to loan servicing is to assign all of a borrower’s federally-owned loans to the same servicer. We acknowledge that this may not automatically occur for all borrowers—especially in the initial implementation stages. However, in time, the assignment of a borrower’s federally-owned loans to the same servicer will become standard operating procedure.

The borrower-centric approach to servicer assignment means that schools may need to interface with more than one servicer. We understand that some schools will need to adjust their processes to manage interfaces with multiple servicers. We appreciate the effort schools will make to assist us in ensuring that borrowers are served as wholly as possible.

Best-In-Business Service Ensures School Support

All of our servicers are highly-qualified experienced student loan servicers and are committed to providing “best-in-business” service. Each servicer will provide the services that are needed by schools. These services include, but are not limited to, the following:

  • Toll-free phone and Web site access for borrower and school customers

  • Single point of contact for school customers

  • Counseling support in the form of materials and Web products

  • Delinquency/default prevention and management support in the form of reports, predictive call modeling, and robust skip tracing tools

Identification and Communication of Servicer Information Ensures Smooth Transition

Upon purchase of a FFEL Program Loan, both the prior FFEL loan holder and the Department correspond with an affected borrower. In our correspondence to the borrower, we will identify the servicer that will service the borrower’s loan and explain that the servicer will service the loan on our behalf. The correspondence will include both toll-free phone number and Web site information for the servicer.

We recognize that implementation of the multi-servicer approach may result in borrower and school customers inadvertently contacting the wrong servicer. Staff at all of our call centers, including the call centers for our four new servicers, will be briefed on the implementation and have the contact information for all servicers readily available. A caller in need of assistance will be provided with the correct toll-free phone number for the servicer he or she identifies.

In addition to identification in borrower correspondence, the servicer of a FFEL Purchased Loan will be identified in the National Student Loan Data System (NSLDS). Both a borrower and his or her school will be able to view the servicer code and name associated with each loan. This individual lookup can be done via the appropriate NSLDS Web site (NSLDS Student Access Web site for students or NSLDS Professional Access Web site for schools). To further assist schools, we are developing a new NSLDS report that will list and provide pertinent information for all loans that have been assigned to our servicers.

In the next announcement of this series, we will provide customer service contact information and NSLDS identification information for all of our servicers, including the four new servicers that will begin servicing FFEL Purchased Loans in September 2009. We will include the information in a format that will be easy to download and/or print and will add the information to the Contact Information pages on our Information for Financial Aid Professionals (IFAP) Web site.

Additional Announcements and Contact Information

As noted above, we plan to post additional announcements as part of this series. Please monitor the IFAP Web site for these announcements.

We appreciate the community’s patience, understanding, and support as we implement this new initiative. Again, we look forward to working with all of our servicers and are committed to providing superior customer service to borrower and school customers through each highly-qualified servicer.

   

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