Watchdog Finds Education Department Failed To Supervise Student Loan Servicers The department's own inspector general says student loan companies aren't following the rules, and that the government isn't doing enough to hold them accountable.

Federal Watchdog Issues Scathing Report On Ed Department's Handling Of Student Loans

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The U.S. Department of Education's independent watchdog issued a scathing new report today. It says the department's student loan unit failed to protect borrowers from the companies it pays to manage federal student loans. NPR's Cory Turner has more.

CORY TURNER, BYLINE: To understand why this report matters, you need to know this - the government doesn't actually manage all of its federal student loans. It pays what are called loan-servicing companies or servicers to do it, handling things like paperwork and call centers. Well, today, the Education Department's inspector general revealed a litany of evidence that servicers are failing to follow basic rules. Seth Frotman is himself a former student loan watchdog and now the executive director of the Student Borrower Protection Center.

SETH FROTMAN: It's hard to look at this as anything other than completely damning.

TURNER: The inspector general reviewed the department's oversight records from 2015 through September 2017, covering two administrations. Among the findings - servicers failed to tell borrowers about their repayment options and sometimes steered them into forbearance. They even miscalculated what borrowers should have to repay.

The report also criticizes the Ed Department, saying it did not study these failures to see if broader patterns could be hurting a lot more borrowers. And it's clear there were patterns. What's more, the report says, Ed officials were reluctant to claw back government dollars from servicers that broke the rules or penalize them by withholding future business.

NPR reached out to two of the biggest servicers but did not get comment. In a statement, the Education Department's press secretary, Liz Hill, says the department fundamentally disagrees with the assertion that we do not have processes and procedures in place to ensure loan servicers provide high-quality compliance service to borrowers. That said, we also are continuously looking for ways to improve, and the department has taken significant actions since the review was completed to improve its oversight of loan servicers. Cory Turner, NPR News, Washington.

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