Secretary of Education Betsy DeVos cancelled the Obama administration’s June 2016 memos for student loans, which included benefits for loan borrowers including simplification of the student loan process and better protection of borrowers, as well as federal oversight of loan servicing contractors. Student loan contracts are not currently managed by the federal government, but are managed by federal loan contractors and third-party contractors.
Prior to the Obama administration’s memorandums, these companies were rewarded for “cashing in” on the most student debt. During Obama’s time as President, however, this practice was replaced by a more transparent system which, “incentivized a good track record and sought to award contracts to companies with a history of helping borrowers.” according to the Policy Direction on Federal Student Loan Servicing. Obama’s plan required the loan collectors to spend less time on loan collection, to help borrowers find the best way for them to pay off their loans and put tougher regulations on the loan contractors to prevent them from misleading clients.