‘Secret shoppers’ to help scrutinize student loan servicers

The Department of Education announced Friday it will send out “secret shoppers” to student loan providers to ensure that borrowers get proper service and hold the companies accountable.

The newly-announced accountability framework also includes increased monitoring of loan servicer interactions with borrowers, including listening in on customer service calls and tracking record keeping.

“The Biden-Harris Administration has made clear that we will not allow borrowers to pay the price for unacceptable servicing failures,” Education Secretary Miguel Cardona said in a statement. “Today’s announcement should send a clear message to all our contracted student loan servicers that the Department will use the full scope of our oversight and accountability tools to ensure borrowers get the level of service they deserve.”

“As the Biden-Harris team works to fix our country’s broken student loan system, we will continue to put the needs of borrowers first and do whatever it takes to support Americans’ success as they return to repayment,” he continued.

The COVID-era federal student loan moratorium ended earlier this year, forcing millions to resume loan payments for higher education. 

More than 45 million people still hold $1.75 trillion in student loans, while college tuition rates continue to increase.

Now, the Education Department will use a combination of data-gathering, borrower complaints and first-hand monitoring in order to better ensure that borrowers get a just experience when handling their loans, the department said.

If investigations find that loan providers aren’t doing their part, the department can withhold payments, force corrective action or even stop the provider from being allocated new borrowers, it said.

“The Department takes very seriously its responsibility to oversee servicers and ensure borrowers have a smooth and successful repayment experience,” the department said in a statement. “The oversight and accountability mechanisms outlined show the Department’s clear commitment to a better student loan system that prioritizes borrower success and a repayment system that puts borrowers first.”

The Biden administration has forgiven billions in student loans, most recently a $9 billion tranche impacting 125,000 people last month.