WHY WAS THIS FUNDED?

The federal government owns and manages a massive portfolio of student loans through programs like the William D. Ford Federal Direct Loan Program, but it relies on private companies called loan servicers to handle the day-to-day work of dealing with borrowers. This contract is the legal agreement that authorizes and funds Nelnet to do that work.

WHAT PUBLIC PROBLEM IS IT TRYING TO SOLVE?

Millions of Americans owe money on federal student loans and need a way to make payments, ask questions, and manage their accounts. The government needs a system in place to collect those payments and keep accurate records, and it contracts private companies to provide those services.

WHO BENEFITS?

Federal student loan borrowers across the country benefit by having a point of contact to manage their loans and get help with repayment. Nelnet employees who work in customer service and financial reporting roles also benefit from the jobs this contract supports.

WHAT ARE THE RISKS?

Contracts of this size carry risks around quality of service, meaning borrowers may receive poor guidance or errors in their account information. There is also a risk that the government may pay more than necessary if oversight of the contractor's performance is not strong.

WHAT HAPPENS IF FUNDING IS REMOVED?

If this contract were cancelled, the federal student loan borrowers assigned to Nelnet would lose access to their current servicer and would need to be transferred to another company, which could cause confusion and delays in payment processing. The government would also need to quickly find another way to manage the financial reporting connected to those loans.

ARGUMENTS FOR

• •Private companies like Nelnet have existing call center infrastructure and staff, which may be faster and cheaper than building a government-run system from scratch.
• •Outsourcing loan servicing allows the Department of Education (ED) to focus on policy and oversight rather than managing millions of individual borrower accounts.
• •Continuity of service ensures that borrowers have uninterrupted access to help with their loans, which is especially important during economic hardship or repayment transitions.

ARGUMENTS AGAINST

• •At nearly $1 billion, this is an extremely large payment to a private company for administrative services, raising questions about whether taxpayers are getting good value.
• •Private loan servicers have faced criticism and legal action in the past for giving borrowers bad advice or making errors that cost borrowers money, raising concerns about accountability.
• •Some argue the government should bring loan servicing in-house or use a single nonprofit servicer to reduce costs and improve consistency for borrowers.