loan companies for students

i want to turn to some other troublingdata recently out of the department. this time it's on the higher educationside. new data from the department's student loan bank show that despite theavailability of many repayment options to help students, we're still facing an avalanche ofstudent loan defaults. when a student defaults, the bank hammers them -- seizing wages, slamming their credit reports -- but it seems that life isn't so hard for theservicers who get paid to manage those loans. so here's my question, secretary king: the department announced a new competition for these servicing contracts. and i knowyou are looking to clean up these deals.

can you tell me what you're doing tomake sure that the next round of negotiations create some accountabilityfor these companies so they actually help families who are struggling instead of just fattening their ownbottom lines? secretary john king: yeah, so we are developing a new servicer contract and a new servicer structure that will involve a common platform withmultiple servicers providing services through that platform. so borrowers willhave a single entry point where they can get and submit information, but thenservicers will compete on performance. one of the key things that we've done inthat servicer contract re-compete is

-- built in a set of principles thatimplement the president's students bill of rights -- student borrowers bill of rights. those principles were developed jointly with the treasury department and cfpband we think represent what good servicing should look like. so this contract will proceed in severalstages. first, the identification of the platform provider and then theidentification of the servicers who will work on that platform. but we intend toensure that servicers do a good job of supporting students and better thanthey've done. warren: good, i'm very glad to hear this in this commitment on your part. but let me just

put a finer point on this: what role should the company's politicalinfluence here in congress, or their connections to officials inside thestudent loan bank, play in the selection process for these servicers? king: none. warren: good. thank you. you know three years ago, the head of the student loan bank testified in this committee that it wasbasically impossible to hold one of the biggest servicers accountable forbreaking the rules because they were more or less too big to fail -- and thishas to stop.

past performance matters. if thedepartment grants another massive new contract to a company with a trackrecord of harming students and members of the military -- or if thecompany is facing state ag and federal lawsuit investigations -- then i thinkthat's a serious problem. i know that you want real reform andthat means holding these student loan servicers accountable. i know that those companies have a lotof lobbyists right here on capitol hill, but the families and the students don't --and they need you. king: absolutely. warren: thank you. thank you, mr.chairman.