Dept. of ED's 21st Century Student Loan Plans Will Require CFPB Action

Yesterday, the U.S. Department of Education (the Department) announced its blueprint for the Department's office of Federal Student Aid (FSA) Next Generation (Next Gen) Financial Services Environment.

To an audience of more than five thousand financial aid professionals from around the world, Dr. A. Wayne Johnson, chief operating officer of FSA said,

"This new approach will modernize the technology and operational components that support federal student aid programs from application through repayment. Students, parents and borrowers will begin seeing meaningful improvements in the customer experience in early 2018 with significant technology and operational infrastructure changes throughout 2019."

Education Secretary Betsy DeVos said,

"This overhaul is long overdue. Students and their families should be treated like the valued customers they are and should have access to the tools needed for success. Today's announcement is a significant first step in our commitment to improving the experiences students, parents and borrowers have with FSA and in bringing federal student aid programs into the 21st century."

According to the announcement,

In spring 2018, FSA will launch its mobile platform, which will allow students and parents to complete and submit the Free Application for Federal Student Aid (FAFSA®) form on a mobile phone. In fall 2018, fafsa.gov will be integrated into StudentAid.gov, making it easier than ever to apply for financial aid directly from FSA's leading online portal. This integration also will allow FAFSA applicants to switch seamlessly between mobile and web, enabling students and their families to apply for financial aid wherever they are and on the device of their choice. Eventually, FSA will consolidate all of its customer-facing websites into a single, integrated and user-friendly online platform to provide students, parents and borrowers a consistent and seamless experience from application through repayment.

Beyond these specifics of seamless mobile/desktop applications, there aren't many details. The announcement continued,

To address future loan servicing needs, FSA is in the process of researching how world-class financial services organizations design and operationalize their customer service engagement practices, as well as web and mobile, middleware, data processing, analytics, storage and hosting capabilities. Through this market research, FSA is refining its strategy to implement the Next Gen Processing and Servicing Environment.

FSA anticipates issuing one or more solicitations in the first quarter of 2018 focused on account processing and loan servicing.

insideARM Perspective

Yes. Giving consumers the ability to communicate using the device and time of their preference; that certainly makes sense. I noted this:

"FSA will consolidate all of its customer-facing websites into a single, integrated and user-friendly online platform to provide students, parents and borrowers a consistent and seamless experience from application through repayment." (emphasis added)

I wonder whether "through repayment" also means post default. Currently, debt collection rules dictate that once a consumer's debt (of any kind; not just student loans) goes into default, you can no longer honor that seamless experience. You've got to send letters in the mail, and call them on a landline. Or you've got to get consent to do otherwise... but you've got to get that consent through the mail or landline.

Consumer Financial Protection Bureau (Mick Mulvaney, Leandra English, democrat, republican, or whomever) - if you are listening - in spite of leadership changes, debt collection rules still require modernization. Millions no longer answer the phone. Many no longer open their mail. The friction between legitimate businesses and lenders has got to be reduced so that accounts can be resolved. You hear a lot of anecdotal negative stories about collections. But the lion's share of interactions are productive. Here are examples of what can happen when consumers and collectors actually connect.