Government may reverse decision on student loan servicing

WASHINGTON – The Education Department says it may reconsider its decision to move the servicing of $1.3 trillion in federal student loans to a single provider.

The department announced Tuesday that while student borrowers will have access to a single user platform, backend customer services could be provided by either one or multiple contractors.

The department had said in May that it would be switching to a single contractor. That decision came under criticism from some Republican and Democratic lawmakers and student debt groups. They argued that relying on a single contractor eliminates competition and could cause that provider to become too big to fail.

The Education Department will engage industry groups in designing the new system. A decision on how many contractors to use will be made in the coming months.