As part of its process moving toward finalizing the Next Generation Financial Services Environment (Next Gen), the Department of Education (ED) on Wednesday said it plans to hire two companies next year to replace the nine loan servicers currently managing the federal student loan portfolio for more than 33 million borrowers.
While an exact timeline was not unveiled, the department said now is the best time to make the transition due to the fact that ED’s contracts with the nine current service providers are set to expire over the next year and a half.
ED published a solicitation for contractors to apply on Wednesday and said proposals are due in December, with the hope to have contracts signed in the spring, barring any delays or pushback. ED said companies that currently serve as loan providers are eligible to bid on the new contracts.
The contractors selected will be required to follow enhanced cybersecurity measures, ED said, in line with Federal Student Aid’s (FSA) five-year strategic plan. ED said the new servicer contracts it plans to award would last for at least five years, with the possibility to extend them for an additional five years depending on the needs of FSA.