Roger Yu, and Kevin McCoy

USA TODAY

The Department of Education said it will hand over the work of servicing federal student loans to one company — from the current roster of nine — in what it says is a money-saving move, triggering concern and criticism from student loan advocates who fear customer service would get worse.

The department estimates the move will save about $130 million in the next five years. "Savings are expected to increase significantly over the life of the contract,” Secretary of Education Betsy DeVos said in a statement. “Borrowers can expect to see a more user-friendly loan servicing interface, shorter email and call response times and an improved payment application method.”

Of about $1.4 trillion of student debt now owed by 44 million Americans, a vast majority of the total -- more than $1 trillion -- is issued by the Education Department. The government currently outsources the work of handling payment, collection, payment deferment and general customer service to nine private companies.

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By granting the business to one company, the government will create "a trillion dollar bank," said Natalia Abrams, executive director of Student Debt Crisis, an advocacy group. "The too-big-to-fail is what we saw with the banks in 2008," she said. "I see this already as an industry out of control, with high profit. And in creating one company...there would be no competition."

The nine loan service providers are: Navient, CornerStone, Granite State, Great Lakes Educational Loan Services, HESC/Edfinancial, MOHELA, Nelnet, OSLA Servicing and FedLoan Servicing (also known as Pennsylvania Higher Education Assistance Agency, or PHEAA).

Navient, which was spun off from Sallie Mae in 2014, is the largest U.S. federal student loan servicer. Shares of Navient rose nearly 2% on Friday. They were up 0.4% in Monday morning trading. The company declined to comment.

The process to streamline the federal student loan servicing contracts began under the Obama administration, which sought to narrow the list of qualifying vendors to four companies — Navient, Great Lakes, Nelnet and FedLoan Servicing. The companies from that narrowed list will submit their proposals to the Education Department to compete for the exclusive government contract. In anticipation of the change, Great Lakes and Nelnet have formed a joint venture, called GreatNet Solutions, to bid for the contract.

It remains unclear when the change will take place. The Education Department will seek the vendors' detailed plans and answer their questions until July 10. Once the contract is awarded, the winning company has 18 months to implement its service. The winner and its subcontractors will be required to sign "level-of-service" agreements, promising to comply with federal standards.

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“Overreliance on a single student loan company can be risky, especially when it comes to large-scale IT projects,” said Rohit Chopra, a senior fellow at the Consumer Federation of America and former student loan ombudsman at the Consumer Financial Protection Bureau. “The Education Department previously relied on a single servicer, which led to major headaches for schools and borrowers.”

But some consumer advocates have suggested a single servicing platform for direct student loans would simplify what can be a difficult process for borrowers.

“Having a single servicer would be helpful, provided it’s done well,” said Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project. “Implementation would be key, and implementation means having the resources to handle the job properly.”

Yu also questioned some of the servicing contract changes included in Department of Education documents issued Friday. The chosen servicer would no longer be required to provide notices in Spanish to borrowers who opted for that language option, she said. Additionally, monthly student loan billing statements would no longer be required to include a breakdown of repayment options developed by CFPB to help borrowers identify the best plans for their situations. A 2015 Government Accountability Office report found that approximately 70% of federal direct loan borrowers who were in default had incomes low enough to qualify for lower cost income-driven repayment plans but had not taken advantage of that option.

The government has experience dealing with an exclusive private-sector partner in student loan servicing. From 2003 to 2013, ACS Education Services handled servicing of direct student loans under a Department of Education Contract worth an estimated $2 billion. Acquired by Xerox in 2010, it's now known as Xerox Education Services.

During ACS’ tenure, many borrowers complained that they were overcharged, or faced difficulties getting into income-driven repayment plans that would lower their monthly payments. In Nov. 2016, ACS agreed to a $2.4 million settlement with the Massachusetts Attorney General’s office over allegations of those problems and others.

ACS cooperated with the investigation and agreed to make improvements to its student loan servicing practices, Massachusetts Attorney General Maura Healey said in an announcement of the settlement.

CFPB says student loan giant Navient cheated borrowers

The Consumer Financial Protection Bureau and two state attorneys general sued Navient in January. The lawsuits alleged that the Delaware-based company, the nation’s largest student loan servicer, processed borrowers’ payments incorrectly, provided inaccurate payment information and failed to act when borrows complained. Additionally, the company allegedly provided incentives to employees who recommended that struggling borrowers postpone payments under an option in which interest continues to pile up, instead of switching to an income-driven payment plan that avoids extra fees.

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Navient has denied the allegations and is contesting the lawsuits.

Follow USA TODAY reporter Roger Yu on Twitter @ByRogerYu.