Top 10 Private Student Loan Servicing Must Haves
Posted by Paul Dockry
Over the recent several years, our industry has come under heavy scrutiny from regulatory agency oversight, enforcement actions and requests for information and it seems to constantly be in the news. The YourLoanAdviser view is one of calm confidence. As a highly regulated institution, we fully understand what it takes to run a successful – and compliant – private student loan operation. We’ve built our private student loan servicing platform with the needs of our clients, their borrowers and cosigners at the forefront of our development. We take compliance very seriously, and help our lender clients navigate their obligations to the more than 50 federal and state regulatory compliance agencies engaged with private student loans. Our position is to be completely transparent about our market strategy and make sure that the differences between the federal student loan program issues – which are 93% of the market – and the 7% of the private student loan market are clearly delineated. There is a lot of noise in the market recently. Focusing on the large, prime and near prime consumer marketplace and utilizing our over 25 years of private student loan data, advanced analytics, quality underwriting and our comprehensive credit, compliance and operational risk management programs we help lenders make responsible private educational loans so that students and their parents can fulfill dreams beyond higher education.
A question you must ask when your institution is looking for a new student loan servicing platform and partner is: Does this organization have the same values as your team? This question is so important that staying in the student loan market can depend on the answer. The partner you choose is your direct connection to your customers. They put a face on your reputation in the community and how they treat your customers today can affect the future of your organization.
Below is my Top 10 list of student loan servicing platform must haves that your team should be looking for in a servicing partner.
1. Flexibility to Accommodate a Variety of Private Student Loans Programs
- Provides your team the ability to offer In-School (Undergrad and/or Graduate), Refinance, and other specialty (e.g. International, Medical, MBA, and more) student loan programs with features such as fixed or variable interest rates, multiple repayment options, multiple communication channels, transparency of information to borrowers and cosigners, robust online functionality, and mobile smart device access.
2. Commitment to Private Student Loan Technology and Analytics
- Has a platform focused specifically on private student loans, not a repurposed federal student loan platform because the requirements are vastly different.
- Program development and portfolio management using superior data analytics to optimize performance. For example, YourLoanAdviser has a database with more than 25 years of comprehensive private student loan analytics covering $14 billion in loans to over 900,000 borrowers.
3. Strength of Regulatory Compliance and Operational Risk Oversight
- Must have ongoing focus on compliance and operational risk management during program development and throughout program servicing.
- Remain vigilant about regulatory changes with both state and federal agencies.
- Maintain a robust compliance management system that includes training, testing and oversight.
4. Secure Servicing System Platforms That Protect Consumer Data
- A day doesn’t go by without hearing about another cyber attack. Your servicer must have procedures and processes they follow to prevent cyber attacks, but also physical system backups and security systems in place to protect your institution and your borrowers from harm.
- Effective oversight of subcontractors/third-party vendors.
- Strong and secure physical and logical technology platforms.
5. Easy and Transparent Access to Data and Information
- Providing account level information to borrowers and cosigners is imperative. The Millennial generation of borrowers demands easy access to their information, and your servicer must make this a priority across multiple platforms and devices, including mobile and desktop. And this same access should be provided to cosigners who “have skin in the game”.
- Enabling your customers to manage their student loans on their terms is simply par for the course.
- Your servicer must also provide you portfolio reporting and detailed analytics to determine the strength of your investment.
6. Well Designed and Built-In Integration with Multiple Options to Promote Successful Repayment
- Life happens. There are times when everyone could use a break from overwhelming financial obligations due to unforeseen events. Your servicer must be able to provide short windows for borrowers to recover stable financial ground before resuming regular monthly payments.
- Multiple repayment options should be available and as you creatively identify different options you believe will serve your customers well, your servicer’s platform should have the flexibility to quickly introduce these new options.
- Fully and systemically supports our women and men in uniform following the Servicemembers Civil Relief Act or SCRA ensuring timely interest rate reductions and postponement of payments when applicable. These women and men and their families have greater concerns in life than having to chase after their private student loan(s). Your servicer must make the process as easy and efficient as possible.
7. Clear Channels of Communication
- Your servicer must be able to communicate with you as a lender and your borrower and cosigner customers using their preferred methods, including online, email, text, phone, printed and mailed correspondence.
8. Scalable Platform
- Your servicer must unequivocally grow with you as your program grows, from as few as 500 borrowers or 10,000 to 100,000 or more.
9. Commitment to Innovation
- Your servicer must continually invest in program design, system enhancements and innovative servicing options that are consumer friendly in ways that drive efficiency in your organization and for your customers.
10. Relational Customer Service
In an era where 1 in 3 Millennials say they are open to switching banks in the next 90 days, customer service is the key to success.
- Does your servicer build relationships with your customers or do they just check the box?
- Is your servicer just doing things because it’s time to do them on the calendar?
- Your servicer must engage and educate your customers to help them meet their financial responsibilities and be successful.
Using this Top 10 list as a starting point for due diligence on your investment in private student loan servicing can help you determine the best partner for your business. Please leave your comments below and add some other must haves you think I may have missed.