About Us

Blog

About Us

Blog

The Missed Opportunity to Use Student Loans as a Learning Tool

Dec 09th, 2015

Last week at the Federal Student Aid conference, the U.S. Department of Education (ED) made big news by announcing the implementation of a single student loan portal for all borrowers that could bypass servicers, the private contractors hired by the government to collect loan payment.

This is a positive step in improving the borrower’s experience with loan servicing and no one can argue with the ease and simplicity of a one-stop shop, but two issues come to mind that a loan servicing portal won’t solve. First, there’s the matter of neutrality. From the consumer’s perspective, regardless of how loan servicing is improved, the federal government is still the lender whose primary job is to get the money back. Borrowers need a “trusted” source for information and guidance. While they are enrolled, colleges very often play this role. Many borrowers who are in trouble may not feel comfortable turning to the lender’s portal for advice.

Second, as I argued in a recent op-ed for The Hill, today’s student loan borrower needs more than an entity that can simply record payments and keep track of their contact information. They need an education on how to manage the debt. The student loan process is a series of “teachable moments” and the ultimate opportunity to instill basic financial knowhow in students of all ages. When we strictly focus on improving the “servicing” aspect, we miss entirely the chance to take advantage of the student loan as a learning tool.

Using debt to finance access to higher education places a moral burden on ED far beyond the responsibility of a mere lender servicing their loans. The portal solves for student loan borrowers’ bad customer service experiences and may help ward off customer complaints about ED’s loan servicing, but what we really need are outside-of-the lines remedies that will also prepare students to be successful financially literate consumers of higher education and all life has to offer.