The Education Department’s $1.6 trillion student loan operation has been running on inconsistent, ad hoc coordination with the private servicers that touch 43 million borrowers, according to a new congressional watchdog report.
What’s more, nobody at the department has ever written down when they’re supposed to loop servicers in early versus dropping instructions on them, a Thursday report from the Government Accountability Office found.
The department gives servicers instructions through “change requests,” formal documents that can range from sending borrowers a reminder email to implementing a new repayment plan.
All four servicers that GAO reviewed said the process would go smoother if the department told them before or right after issuing a change request. The department doesn’t do this consistently, as it’s left to staff discretion.
One change request generated six rounds of questions and answers over two months before servicers had clarity, and one servicer had to redo completed work because the Education Department introduced new requirements midstream.
A separate complex change request took over a year and a half to implement, in part because the department added, changed and deleted requirements throughout a servicer’s more than 300-page contract without early input.
In one case, the department gave servicers one business day’s notice before posting new loan-forgiveness payment-count data on StudentAid.gov, but servicers were not staffed for the resulting call volume.
The GAO’s review of change requests covered nine months of the Biden Education Department and three months of the current administration.
House Education and Workforce Committee Chairman Tim Walberg and Senate Health, Education, Labor and Pensions Committee Chair Bill Cassidy blamed the Biden-Harris administration.
“Biden-Harris threw borrowers and servicers into total chaos,” Mr. Walberg, Michigan Republican, said in a statement. “Students and taxpayers deserve a system that is transparent, accountable, and functions — not one plagued by mismanagement and confusion.”
Mr. Cassidy, Louisiana Republican, said the former administration “dramatically increased the scope of its student loan program and misled borrowers into thinking their debt would be canceled.”
Coordination has recently improved, with the GAO citing last September’s multiday summit with servicers on new repayment-plan rules under the GOP’s One Big Beautiful Bill Act that led the department to revise a change request before sending it.
But the GAO says the job is not done, with the current Education Department declining to implement the one concrete fix the agency recommended.
The office said the department should adopt formal criteria for when to coordinate early.
In its written response, the department pushed back, arguing formal criteria would hurt its “ability to implement changes in a timely and efficient manner while being responsive to administration priorities,” and that complexity cannot always be judged in advance.
The GAO, however, rejected that reasoning.
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