Education Department will use ‘secret shoppers’ to detect student loan servicer errors

The Department of Education announced it will use “secret shoppers” to help monitor the student loan repayment process, as payments for millions of borrowers restarted last month following a pause during the Covid-19 pandemic that lasted more than three years.

The department outlined framework Thursday for a student loan oversight program to increase student loan servicer accountability and make sure borrowers are not harmed by servicer errors. Servicers are companies the Education Department contracts with to handle billing and other services on federal student loans.

The program will include a monitoring system where secret shoppers, or Federal Student Aid employees, will insert themselves into the student loan process as if they are borrowers themselves to detect servicer errors and allow “the Department to quickly address any challenges facing borrowers.”

“The Biden-Harris Administration has made clear that we will not allow borrowers to pay the price for unacceptable servicing failures,” said Education Secretary Miguel Cardona in a press release.

“Today’s announcement should send a clear message to all our contracted student loan servicers that the Department will use the full scope of our oversight and accountability tools to ensure borrowers get the level of service they deserve,” he said.

As part of the program, Department of Education employees will listen to and score servicers’ customer service representatives interacting with borrowers and review their phone calls and chats to “measure the accuracy of servicers’ responses to borrowers’ questions.”

The secret shopper campaign will also detect “broad return to repayment issues as well as specialty servicing issues such as questions on Public Service Loan Forgiveness,” the press release says. PSLF wipes away remaining student debt after qualifying public-sector workers make 120 monthly payments.

The framework announcement comes on the heels of the Education Department announcing on October 30 that it is penalizing MOHELA (Missouri Higher Education Loan Authority), one of its student loan servicing contractors, for failing to send billing statements on time to 2.5 million borrowers.