Putting My Borrower Hat On
In my letter, I disagree with the Senator. But I wasn’t writing from the perspective of Erin Dillon, policy analyst at Education Sector. Instead, I was writing as Erin Dillon who has been repaying student loans for several years, along with my husband.
To add to my description in the letter of the private lender’s terrible “customer service”: 1) they repeatedly provided my husband and I with conflicting and incorrect repayment information and 2) we get four copies of the exact same letter from them approximately once a week. And we all know what happens when we get multiple letters on the same, corporate letterhead–they get put aside or end up in the trash. Not exactly a model of private sector efficiency and customer-oriented behavior.
Putting my policy analyst hat back on, this kind of customer service is not just an inconvenience. As Student Lending Analytics points out, confusion over who, when and how much to pay can lead borrowers to default.
I’m not saying that Direct Lending is guaranteed to be a model of customer service, but I do think there is a chance things could improve under Direct Lending. Right now, lenders don’t make their money by selling students on their great repayment options or easy to use website. Lenders make money by selling their loan product to schools and convincing the federal government to continue providing subsidies. So schools get the customer service and the government gets lobbied.
Private loan companies are not full of bad people who don’t care about students, it’s just that the incentives in the current system don’t reward lenders that put a lot of resources into borrower customer service. Under the proposed 100% Direct Loan system, these loan companies won’t be making loans anymore. Instead, some of these same companies will get a government contract to service student loans during repayment. Assuming the
