Richard Cordray, the FSA’s chief operating officer, in Columbus, Ohio on May 8, 2018. (Photo . [+] by Kirk Irwin/Getty s)Getty s.
One of the top federal student loan servicers for the Department of Education will continue to operate for another year. Here’s what it means for student loan borrowers.
FedLoan Servicing Gets One Year Extension To Service Federal Student Loans
When its contract with the government’s federal student loan servicing system expires in December, the Pennsylvania Higher Education Assistance Authority (PHEAA), which conducts business as FedLoan Servicing for its Department of Education servicing operation, announced earlier this year that it would be leaving the system. FedLoan handles 8. 5 million federal student loan borrower accounts. Public Service Loan Forgiveness (PSLF), a federal student loan forgiveness program for borrowers working for nonprofit and public employers, is also only administered by FedLoan as a contracted servicer.
FedLoan Servicing announced on Wednesday that it had reached a deal with the Department of Education to extend its servicing contract by an additional year. “The Pennsylvania Higher Education Assistance Agency (PHEAA). has signed a one-year contract extension to continue servicing Federal student loans after its current servicing contract expires on December 14, 2021, according to a statement from the agency.
Student Loan Payment Pause Ends Soon
The contract extension has major implications for borrowers. Millions of borrowers would have had to deal with upsetting servicing transfers as they resumed repayment for the first time in nearly two years if the national federal student loan payment pause hadn’t expired on January 31, 2022. Advocates for borrowers had expressed concern that this might have disastrous consequences.
FedLoan should continue managing the majority of its federal student loan accounts throughout the transition to repayment this winter thanks to the extension. According to the organization, “PHEAA [will continue] its work to prepare borrowers for the resumption of federal student loan repayment on February 1, 2022.” MORE FROM.
FedLoan Servicing and Public Service Loan Forgiveness (PSLF)
The agency will continue managing the Public Service Loan Forgiveness (PSLF) program as a result of FedLoan’s contract extension. The announcement by the agency comes as the Biden administration is launching a new “Limited PSLF Waiver,” a program that temporarily relaxes important eligibility requirements for the PSLF program. According to the Department, 30,000 borrowers will be qualified for $2 billion in student loan forgiveness under the waiver, with possibly thousands more getting close to the program’s required 120 payments for relief. The contract extension virtually assures FedLoan’s continuation of managing the PSLF program throughout the waiver period.
Advocacy groups have long accused FedLoan of improperly managing the PSLF program, which has resulted in congressional inquiries and legal actions. In spite of the fact that these borrowers are eligible for student loan forgiveness under the new PSLF waiver, FedLoan has been incorrectly denying them for PSLF, according to a report by NPR earlier this month. FedLoan cited a lack of direction from the Department of Education and said that until the Department changed its servicing contract with the organization, it “cannot move forward” to process the updated PSLF requirements.
Federal Student Aid Chief Operating Officer Richard Cordray sought to reassure borrowers in a letter earlier this week. “Please understand that complex changes of this magnitude are hard to process and execute. They require large-scale data and processing work, which takes time. FSA does much of this work with FedLoan Servicing. We are jointly responsible for making sure the work is done right.”
FedLoan Servicing Borrowers Will Still Eventually Be Transferred To New Servicers
Prior to December 2022, PHEAA said in its statement that it will continue to transfer borrower accounts to new loan servicers. According to the organization, “This contract extension, which will end in December 2022, provides that all loans will be successfully transferred from PHEAA to other servicers before that date,” implying that borrowers could be transferred to any of the Department’s current federal student loan servicers, including MOHELA, Nelnet, Navient, or Great Lakes Higher Education.
What will happen to FedLoan servicing loans?
As a student loan borrower, you may have already gone through a servicer transfer; generally speaking, everything goes without a hitch. Borrowers in this situation will be transferred to one of the following servicers because FedLoan will no longer be in charge of managing federal student loans: MOHELA, Aidvantage, Edfinancial, or Nelnet.
Who will replace FedLoan?
Beginning in early July 2022 and continuing through September 2022, Federal Student Aid (FSA) started transitioning the Public Service Loan Forgiveness (PSLF) program, borrowers, and their loans from FedLoan Servicing to MOHELA in stages.
Will student loans be deferred again after August 2022?
The U. S. On November 22, 2022 (two days after this article’s initial publication), the Department of Education announced an eighth extension to the payment pause and interest waiver.
Will student loans be deferred after May 2022?
Today, the U. S. A final extension of the moratorium on student loan repayment, interest, and collections through December 31, 2022 was announced by the Department of Education (Department). Borrowers should plan to resume payments in January 2023.