Education Department Names 4 Lenders to Service Student Loans
Washington — Ending months of speculation, the Education Department announced today that it had chosen four lenders to service its educational loans: American Education Services/Pennsylvania Higher Education Assistance Agency, Great Lakes Educational Loan Services Inc., Nelnet Inc., and the Sallie Mae Corporation.
The department’s announcement had been eagerly anticipated among lenders, which are awaiting details of Congress’s plan to overhaul the student-loan programs. If lawmakers adopt President Obama’s proposal to abolish the bank-based guaranteed-loan program, servicing contracts like those announced today could become the primary way banks and other lenders participate in student lending.
The four lenders, which will get five- to 10-year contracts worth at least $5-million each, will be responsible for servicing direct loans as well as guaranteed loans purchased by the department through the federal rescue plan.
The other two finalists were ACS Education Solutions LLC (the current direct-loan servicer) and Wells Fargo.
Each servicer will be responsible for up to 50 million student loans over the initial five-year period. A contract could be extended to 10 years if the servicer meets the department’s customer-satisfaction and default-aversion standards.
The department has not said whether it will hire more servicers if the president’s plan is enacted by Congress. However, a news release issued by the department says the new contracts “offer the department the capability to manage all types of Title IV student-aid obligations, including but not limited to servicing and consolidation of outstanding debt.” —Kelly Field