Education Department’s Oversight Team Cuts: What It Means for Borrowers

On March 11, the United States Department of Education announced it was cutting nearly half its workforce, including staff from its Vendor and Program Oversight Group, which is responsible for overseeing federal student loan servicers. This could be bad news for student loan borrowers. In addition to having less support should you have questions about your debt, you may also have fewer options for recourse if a servicer mishandles your loan.

What Was the Vendor and Program Oversight Group?

The Vendor and Program Oversight Group was a sub-office nestled multiple layers within the Department of Education’s organization. Here’s where it fit: Within the Education Department is the office of Federal Student Aid, under which is the Office of Student Experience and Aid Delivery, of which the Vendor Oversight and Program Accountability Service is a primary directorate, which oversaw the Vendor and Program Oversight Group.

According to the Department of Education, the Vendor and Program Oversight Group made sure loan servicers—third-party companies contracted to manage billing, repayment, and customer service for federal student loans—meet performance standards and comply with federal requirements.

Impact on Student Loan Borrowers

While the full impact of the Vendor and Program Oversight Group layoffs remains to be seen, it doesn’t bode well for those with student loan debt. 

Many borrowers are already overwhelmed by a confusing and ever-changing student loan landscape. With less government oversight, student loan servicers may face fewer consequences for administrative errors—or even misconduct—such as overcharging borrowers or cutting back on customer service to lower costs. As a result, borrowers could experience worse service, including longer wait times and less support when they have questions.

Student loan borrowers in low-income communities could be hit particularly hard. For those struggling to repay their student debt, a lack of government resources and loan servicer support may lead to an increase in defaults, exacerbating what has already been called a student loan crisis.

The Bottom Line

The recent cuts to the Education Department’s oversight team signal a troubling shift for student loan borrowers, as this could undermine the accountability and quality of service that borrowers are entitled to from their servicers. Without strong institutional expertise and resources, borrowers may face longer wait times as well as a higher risk of loan mismanagement and default.