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Consumer advocates worry merger created student loan company 'too big to fail'

Every month, approximately 40 million Americans make payments to a corporation they know almost nothing about.

There are just four major companies contracted by the federal government to process the nation’s student loan checks and after the just-completed merger of two of these firms — Nelnet Inc. NNI, -0.78% and Great Lakes Educational Loan Services Inc. — one company will handle more than 40% of all payments.While it might not seem to matter who processes the payments, these companies have an outsize role in the shape of America’s $1.4 trillion student-loan burden. Though the rising cost of college and stagnant wages are the most cited reasons for our nation’s student-debt problems, borrower advocates, law-enforcement officials and the Consumer Financial Protection Bureau have said the student-loan industry itself is also to blame. These processors can often make the difference for struggling borrowers between successfully paying down a debt and the nuclear option — default. In an ideal world, no federal student-loan borrower would default on his or her debt, thanks to the myriad of programs available through the government, but, in reality, roughly 1 million defaulted last year — a sign, advocates say, that student-loan servicers don’t work sufficiently in borrowers’ best interests.

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