The primary lenders servicing those loans — like Countrywide — would earn new fees for the loan adjustments.
Today, most new student borrowing comes from federal direct loans, with private lenders servicing the government-issued loans.
If Globefunder services the loan, it charges the lender 1% to 2.5% of the loan amount; if the lender services it, Globefunder charges a one-time (again, undisclosed) brokerage fee.
Furthermore, proximity to formal financial institutions is expected to lead to a wider outreach of financial services as a result of minimum transaction costs incurred by the lender to service those clients.
"Your unpaid balance keeps getting higher and higher and higher," said Jennifer Murphy, the director of lender-servicer relations for the nonprofit Center for New York City Neighborhoods.
The company through its subsidiaries purchases and manages portfolios of defaulted and bankrupt consumer receivables and provides a broad range of accounts receivable management services to lenders, service providers, governments, and others.
Officials at the Federal Reserve have said the review found "significant weaknesses" in various aspects of how lenders service mortgages, which involves collecting payments, modifying delinquent loans, and foreclosing on borrowers upon default.
Although the federal government is now in control of issuing the loans, Sallie Mae and other lenders still service them.
A mortgage broker is a "wholesaler" who uses several lenders to service their customers.
This legislation would allow lenders to continue servicing all federal loans -- ensuring high-quality customer services for borrowers and preserving jobs.
