The announcement comes hours after a bipartisan group of senators unveiled legislation that would have blocked the administration's plan.

| Neil Blake/AP DeVos drops plan to overhaul student loan servicing

Education Secretary Betsy DeVos on Tuesday abandoned her plan to overhaul how the federal government collects payments from the nation’s more than 42 million student loan borrowers after it faced growing resistance from congressional Republicans and Democrats.

The Trump administration announced that it was scrapping plans to award a massive contract to a single company to manage the monthly payments of all student loan borrowers, and said it would come up with a new proposal aimed at improving customer service for student loan payments.


“By starting afresh and pursuing a truly modern loan servicing environment, we have a chance to turn what was a good plan into a great one,” DeVos said in a statement.

DeVos had pitched her initial loan servicing plan in April as an effort to simplify a complicated student loan system and save money for taxpayers. She said that hiring a single servicer would make it easier for the Education Department to hold that company accountable.

But the plan ran into stiff opposition from industry groups and Capitol Hill. Democrats assailed the proposal, saying it would reduce consumer protections for borrowers and lead to a too-big-to-fail federal contractor. Some Republicans also criticized the plan for reducing competition among student loan servicers.

The Education Department announcement came several hours after a bipartisan group of senators unveiled legislation that would have blocked DeVos’ plans. The bill — sponsored by Sens. Roy Blunt (R-Mo.), Elizabeth Warren (D-Mass.), James Lankford (R-Okla.) and Jeanne Shaheen (D-N.H.) — would require the department to keep its current system of “multiple student loan servicers.”

Morning Education A daily dose of education policy news — weekday mornings, in your inbox. Email Sign Up By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

"I'm glad the Education Department is changing course," Warren said. "But it will be important to continue watching the department to evaluate whether its decisions are good for the millions of struggling federal student loan borrowers.”

Liz Hill, a department spokeswoman, told POLITICO that the announcement on Tuesday was not a response to the legislation. The changes, she said, had “been under consideration” since DeVos tapped A. Wayne Johnson as the new head of student aid in June and he “brought his fresh perspective and private sector experience” to the project.

Rep. Virginia Foxx, chairwoman of the House education committee, said she believes DeVos “made the right decision to cancel the single-servicer proposal,” spokesman Michael Woeste said in a statement to POLITICO.

Foxx (R-N.C.), who has long been critical of the Education Department’s office that manages student loans, wants to work with the Trump administration to find “a legislative solution that that ensures high-quality service to borrowers,” Woeste said.

Senate HELP Committee Chairman Lamar Alexander (R-Tenn.) also praised DeVos’ change in plans, saying the department’s new approach “should make it simpler for students to manage their loans” and that he hopes it “will result in competition and better service."

Department officials said they will solicit feedback from student loan industry groups and “various stakeholders and industry technology leaders” as they develop a new plan to overhaul student loan servicing for the federal government’s $1.3 trillion portfolio of student loans.

The new plan calls for a single platform for back-end processing and data storage, but department officials said they haven’t yet decided whether to hire a single company or multiple providers for the consumer-facing account servicing.

Johnson, the department’s new head of federal student aid, said in a statement that the administration “will take the best ideas and capabilities available and put them to work for Americans with student loans.”

The Trump administration’s new plan will create “a customer support system that is as capable as any in the private sector,” said Johnson, a former financial services executive who was tapped by the Trump administration in June. He replaced the previous chief, James Runcie, who quit earlier this year after a dispute with DeVos.