US Education Dept to use 'secret shoppers' to monitor loan servicers

FILE PHOTO: Education Secretary Miguel Cardona delivers remarks in Washington

By Jeff Mason

NEW YORK (Reuters) - The U.S. Education Department will press forward with a "secret shopper" program to help ensure that companies properly service student loans as millions of borrowers begin repaying debt that had been put on hold during the pandemic.

"As we're bringing folks back onto repayment, we need to make sure that the servicers are doing it well, and that they're responsive to the needs of the borrowers and when they're not, we're going to hold them accountable," Education Secretary Miguel Cardona told the Reuters NEXT conference.

Under the so-called secret shopper program, Cardona said, the Education Department will send its employees to go through the loan process as if they are borrowers.

The department said in a press release it will also listen in on some phone calls between borrowers and customer service representatives for loan servicers and score the performance of the servicers.

"We're rolling out a roadmap that increases accountability, support and incentivizes those servicers that do exceptionally well or go above and beyond," Cardona said.

Student loan payments were paused during the COVID-19 pandemic as shutdowns and other fallout from the spreading virus upended the U.S. economy but have since resumed.

Last month, the Education Department said it withheld $7.2 million in payment to loan servicer MOHELA for failing to send billing statements on time to 2.5 million borrowers.

(Reporting by Jeff Mason; Writing by Daniel Burns and Eric Beech; Editing by Lisa Shumaker)