Story perspectives

Education Department Revamps Support for 5 Million Borrowers

8/14/2025

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Summary

Story summary

The Department of Education is restarting collections for over 5 million defaulted borrowers, focusing on better servicing and communication.
New contracts under the Unified Servicing and Data Solution (USDS) will improve borrower support and income-driven repayment processes.
A reconciliation bill allocates $1 billion to Federal Student Aid to enhance servicing and outreach.
Policymakers must facilitate smooth transitions for borrowers exiting default to reduce redefault rates.
Increased federal investment is essential to resolve systemic issues in student loan servicing.

History

Historical Context

The Health Care and Education Reconciliation Act of 2010 reformed federal student loans by eliminating private lenders and establishing direct lending through the Department of Education. By 2023, the Department allocated $1 billion to improve servicing for over 5 million defaulted borrowers, addressing systemic issues that have persisted since the 1980s and aiming to reduce future redefault rates.

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Story summary

The Department of Education is restarting collections for over 5 million defaulted borrowers, focusing on better servicing and communication.
New contracts under the Unified Servicing and Data Solution (USDS) will improve borrower support and income-driven repayment processes.
A reconciliation bill allocates $1 billion to Federal Student Aid to enhance servicing and outreach.
Policymakers must facilitate smooth transitions for borrowers exiting default to reduce redefault rates.
Increased federal investment is essential to resolve systemic issues in student loan servicing.

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