Student lending is no easy task. For state-based lenders, the mission goes far beyond issuing and managing loans. They play a vital role in providing critical financial support to students, all while juggling legacy systems, navigating ever-changing regulations, and handling high loan volumes. Managing these complexities efficiently doesn’t just save money—it frees up time and resources for essential services like grants, FAFSA assistance, and other student-focused programs that support success beyond the loan process.
Top 3 Student Lender Challenges:
1. Regulations Keep Changing
Both Federal and State laws about what student lenders can and cannot do are constantly changing. For example, some States have introduced strict rules about how lenders must treat borrowers. At the same time, there’s debate over things like loan forgiveness and repayment options. These shifting policies make it hard for lenders to keep up, especially if their systems aren’t designed to adapt quickly.
For instance, the U.S. Department of Education has revised its stance to encourage State collaboration on student loan servicing, allowing States to enforce borrower protection laws addressing issues like unfair or deceptive practices.
Additionally, legislative proposals aimed at student loan forgiveness have faced legal challenges and political scrutiny, creating uncertainty for both lenders and borrowers.
These evolving regulations and political dynamics underscore the importance for lenders to have adaptable student loan software that can swiftly respond to new legislative directives and regulatory changes.
2. Borrowers are Confused
With repayment plans restarting after long pauses, borrowers are struggling to figure out their options. This creates a surge in calls and complaints, putting extra pressure on lenders. Outdated systems can make it even harder to provide the answers borrowers need.
For example, in 2023 we saw the return of student loan payments, with the implementation of new income-driven repayment plans. Some borrowers have reported issues with incorrect payment calculations and difficulties enrolling in new plans, leading to increased call volumes to loan servicers.
And more recently, the Consumer Financial Protection Bureau (CFPB) has noted that borrowers who missed student loan payments are more likely to live in high-poverty areas and struggle with other debts, indicating broader financial stress.
These challenges highlight the importance of modern, flexible student loan management software that can adapt to changing regulations and borrower needs, ensuring efficient and compliant loan servicing.
3. Legacy Systems are a Problem
Many U.S. government agencies continue to operate on outdated student loan software, some of which are over 50 years old. These legacy systems are costly to maintain, vulnerable to security risks, and often lack the flexibility required to meet current operational demands. For example, the Government Accountability Office (GAO) reported that the Internal Revenue Service (IRS) relies on applications and hardware that are 25 years or older, utilizing programming languages that are no longer widely supported.
This reliance on antiquated technology and an old student loan platform, hampers efficiency and poses significant challenges in adapting to modern requirements. Many State-based lenders still rely on old loan servicing systems. These platforms were not built for today’s needs—like handling high loan volumes, ensuring compliance, or offering borrowers flexible repayment options. Simply put, student loan software such as these are slowing them down.
How Does OFSLL Lead the Way?
Compliance is a cornerstone of student lending. Federal and State regulations change frequently, making it critical for lenders to maintain systems that adapt quickly and accurately. Oracle Financial Services Lending and Leasing (OFSLL) student loan software (or, student loan platform), is designed to help lenders meet these challenges head-on.
1. Automated Compliance and Policy Updates
Regulatory changes can happen quickly, but OFSLL is built for flexibility:
- Modular design allows for seamless adjustments to workflows and rules, ensuring compliance without disrupting operations.
- Its advanced architecture is equipped to integrate new policies as they emerge, keeping you compliant without downtime.
- Automated updates ensure that your lending practices are always aligned with the latest requirements, freeing your team from the burden of constant monitoring.
- Out of the box configurable features like payment calculations, amortization schedules, GL interfaces, and securitization features are designed to meet legal and accounting standards.
2. Real-Time Reporting and Audit Trails
Transparency and accountability are key to compliance. OFSLL student loan software provides:
- Real-Time Reporting: Generate compliance reports quickly and accurately for internal reviews or regulatory submissionsor connect your existing reporting tool directly to the Oracle database .
- Detailed Audit Trails: Every transaction is logged and accessible, offering a clear record of activities to address any regulatory inquiries or audits.
3. Secure Data Management
Regulatory bodies demand strict data security, and OFSLL student loan software excels here, too:
- The platform safeguards sensitive borrower data with advanced encryption and robust security protocols.
- Regular updates to security measures ensure ongoing compliance with data protection laws like FERPA and GLBA (Gramm-Leach-Bliley Act).
Compliance Without Compromise: The OFSLL Advantage for Student Loan Software Management
With Oracle Financial Services Lending and Leasing (OFSLL), staying compliant becomes an integral part of your student loan platform, freeing your team to focus on what matters most: supporting borrowers and growing your portfolio.
At DecisivEdge, we’ve seen firsthand how modernizing outdated systems with OFSLL transforms operations for State-based lenders. When a major State lender needed to replace its aging servicing platform, our team helped implement OFSLL in their student loan software and tailored it to their unique needs. The result? A fully compliant, efficient, and borrower-friendly student loan platform that elevated their operations and reduced compliance risks.
If you’re ready to learn how DecisivEdge and OFSLL can modernize your student loan software, read the full case study here.
To start a dialogue and ask questions about our experience with State student lending associations, send an email to GetResults@DecisivEdge.Com
