The federal student aid system is in the midst of a fundamental overhaul. A long-standing effort to revamp the management of student loans is coming to a head, as are efforts to make it easier to enroll in income-driven repayment plans and obtain financial aid.

The stakes are high for millions of Americans who have relied on federal aid to finance their education, those who will need such support in the future and those responsible for the transformation.

None of this is lost on Richard Cordray, the newly appointed head of the Education Department’s federal aid office tasked with instituting those reforms.

The office provides more than $150 billion in federal grants, loans and work-study funds to college students and has become one of the nation’s largest lenders. Policy experts have questioned whether the office has the economic expertise to meet the challenge of rising loan defaults and an unwieldy lending system.

Cordray, who replaced Mark A. Brown, stepped into his new role last month as lawmakers voiced concerns about the department’s ability to shepherd borrowers back into repayment when the pandemic moratorium ends in September. Millions were in default prior to the payment pause, which many Democratic lawmakers say is the result of poor guidance from the department’s loan servicers, such as Navient and Nelnet.

Although the student aid office is overhauling the way it administers and manages federal loans — a project dubbed NextGen — pushback from contractors and members of Congress has resulted in delays. This week, Cordray extended the department’s contracts by six months with existing servicers to give the agency more runway. But he told the companies the extension would be “the last action FSA will take under my leadership that qualifies as business as usual.”

In a conversation with The Washington Post, Cordray discussed the matter at greater length and his developing vision for the student aid office. An edited version of the conversation follows.

Q: In the letter you sent to the servicers this week, you mention that FSA will be working to set clear performance benchmarks. What do you have in mind at the moment?

A: I dealt with the loan servicers when I was head of the Consumer Financial Protection Bureau. And, you know, there was a variety of experiences. Some happier than others.

We’re looking at more specific performance benchmarks that are rigorous and that, if not met, would lead to termination of contracts or reallocation of loans. That has to do with how borrowers are treated, how quickly things are handled. We need to get the incentives aligned and get the servicers on the same page with us in terms of the department’s objectives about how borrowers are to be treated.

There’s been benchmarks in place in recent years. But, you know, we expect to be rigorous about executing on that. The servicers are kind of expecting that here. They know the background. They’ve dealt with me before. We intend and will hold the servicers accountable.

Q: One of the biggest complaints from servicers that I have heard routinely over the years is that the department has never provided comprehensive guidance for servicing, any sort of manual or straight, clear rules of the road. And that creates more confusion among borrowers as well as the servicers. What is the department doing to address that concern?

A: Yeah, look, whether that is a true and legitimate concern or whether it’s a little bit of an excuse for a situation, you know, I won’t speculate. But we are going to create specific and clear measurable ways of assessing performance. And the servicers are either going to meet those or not. And if not, there will be consequences. That’s how I intend to operate in this position.

Q: As I’m sure you’re aware, members of Congress have expressed concerns about the millions of borrowers being thrown back into repayment this fall. What is FSA doing to prepare for the end of the payment pause?

A: We are meeting intensively about that right now. There’s a lot of reason for concern here. There are a lot of moving parts. There’s issues around loan forgiveness that might intrude on this as well and affect it. And there are issues around existing servicer contracts and the like. It’s a very complex situation, but we’re going to work through it quickly in a common-sense way.

Q: There were about 7.4 million borrowers in default prior to the pandemic. There is real concern about what happens to those borrowers and the potential for more people to face that fate when the moratorium ends. What is the department doing to help those borrowers as they return to repayment?

A: You know, how that is handled will matter enormously to those borrowers and will matter enormously to the operational details of our program. You’re asking me about various things that I don’t have decisions for you today, but these are things that are going to be decided in the very near future. And as we have them will be, we’ll be glad to keep you apprised.

Q: So much of the conversation around student loans has focused on cancellation, but the servicing piece is also extremely important. NextGen promises to resolve some of the issues consumer advocates have raised about servicing, but it is a project that predates your tenure. What is your long-term vision for loan servicing?

A: Yeah, I’ve been here a month so I may not have all the news for you today. There’s some elements, as you know, of NextGen that are already underway and that so far, I would say what I’ve seen, it seems sensible. There are longer-term issues about what to do with the debt collection aspect and what to do with the loan servicing aspect, which has not yet been decided. And these are things we’re working to decide. And as we have things to tell you about that, which again, should be in the foreseeable future, we will make sure that you’re aware.

Q: What is the significance of rescinding the 2017 memo requiring servicers to send a request to FSA before releasing information to the state attorneys general? How does it factor into your broader vision for FSA?

A: It’s a very clear sense that the different parts of government working together to ensure oversight and accountability of these very large servicers with millions of customers is really important. It’s not a job just for one area of the government. Multiple areas can work together. One of the things we’re signaling here very loud and clear is we’re going to work with those people. We’re not going to try to stonewall them, as I think was happening under the prior regime. It will help us get to the ultimate goal, which is better service for borrowers across the country and holding servicers accountable to provide that service, which is what we at the department intend to do as well.