‍AFC Urges the Office of Federal Student Aid to Modernize Systems to Meet Current Financial and Consumer Needs

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Washington, D.C. (October 22, 2024) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies, innovative banks, and student loan servicers and providers, sent a letter to the U.S. Department of Education Office of Federal Student Aid (FSA) expressing serious concerns about the severe technological and programmatic issues that are limiting FSA’s ability to effectively serve prospective, current, and former students. These failures have hampered access to financial aid, borrowing, and loan repayment processes, harming millions of students across the nation.

“AFC believes that FSA’s current operational struggles convey a critical need for immediate reform,” said Phil Goldfeder, Chief Executive Officer of AFC. “The digital-first landscape of today’s financial services industry requires a modern approach to better serve students. Our members stand ready to collaborate with FSA to improve their processes and ensure that students receive the timely, accurate data and services they deserve.”

In their letter, AFC pointed to the troubled rollout of its Free Application for Federal Aid (FAFSA) form and FSA's ongoing delays in providing data to student loan servicers. These delays have left companies unable to offer clear guidance to borrowers, leading to confusion during critical decision-making periods. The lack of accurate information has created a ripple effect, further hindering students’ ability to manage their loans effectively and access repayment options that align with their financial situation.

“Taken together, these issues convey a distinct need for FSA to significantly reform its processes and systems in a manner that is befitting of the modern financial services industry and the digital-first consumer demand underpinning it. At each stage of the student lending process, FSA has shown the need to improve its programs and technologies to modernize its offerings for students, their families, colleges, and student lenders,” wrote Ian P. Moloney, Senior Vice President and Head of Policy and Regulatory Affairs at AFC. “Without addressing these key areas, the student loan system will remain fragmented and inefficient, placing unnecessary burdens on borrowers and servicers alike.”

AFC is committed to working alongside FSA and Congress to ensure that secure and permissioned access to student loan data is implemented, allowing borrowers to benefit from employer-matching contributions for student loan payments under the SECURE 2.0 Act of 2022. Modernizing these systems is vital for students to fully utilize such programs, which are currently underutilized due to FSA’s failure to act.

A standards-based organization, AFC is the premier trade association representing the largest financial technology (Fintech) companies and innovative banks offering embedded finance solutions. AFC’s mission is to promote a transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial services and encouraging sound public policy. AFC members foster competition in consumer finance and pioneer products to better serve underserved consumer segments and geographies.

AFC’s full letter is available here.