An audit released by the Education Department on Thursday described its slipshod oversight of federal student loan servicers that were regularly let off the hook for mistakes, driving up costs for taxpayers and for borrowers already owing more than $1 trillion in debt.
The department failed to track many mistakes by servicers, the contractors hired to send out monthly bills, keep track of what borrowers owe and help them navigate repayment options. And when serious problems were discovered, the department rarely invoked its contractual right to dock servicers’ pay, the department’s inspector general said in its report.
The result was a group of contractors that effectively regulated themselves, with no incentive to fix their repeated failures, the report concluded.
Student loan servicers and Education Department officials pushed back against the audit’s findings. In a written response included in the report, James F. Manning, the acting chief operating officer of the agency’s Federal Student Aid office, said his department was dedicated to giving borrowers “world-class service” and strongly disagreed with the report’s conclusion.