Over 14 million borrowers will be affected by major changes to the federal student loan management system in the coming months.
Several large student loan management companies under contract with the Department of Education recently announced that they will not renew their agreements with the federal government, which means that accounts managed by these services will have to be transferred to others. companies. In the meantime, the Department has extended the contracts of several other loan managers for varying periods. The situation has changed several times in recent months, confusing borrowers as the national student loan payment hiatus nears its expiration in late January.
Here is the latest news on the major changes to the student loan service.
Navient student loan service
Earlier this fall, Navient announced plans to withdraw from the Department of Education’s federal student loan management system. The company manages six million federal student loan borrower accounts on behalf of the department.
Subsequently, the department approved Navient’s proposal to transfer those accounts to another company called Maximus, an existing contractor for the department that primarily handles delinquent federal student loans. Maximus will do business under the name “Aidvantage”. In an earlier statement, Navient said transfers to Aidvantage are expected to be completed by the end of this year, and Navient and the Department of Education have pledged to communicate clearly with student loan borrowers on the logistics of the loan. transfer.
Only federal student loans held by the Department of Education are transferred to Aidvantage. FFEL program student loans held in commerce and private student loans managed by Navient are not expected to be affected by these changes, and Navient is expected to continue to manage these loans.
FedLoan Servicing, the Department of Education wing of the Pennsylvania Higher Education Assistance Authority (PHEAA), also announced that it would be leaving the department’s federal student loan system. FedLoan is another major service provider under contract with the Department of Education that manages more than eight million borrower accounts. Some FedLoan accounts have already been transferred to MOHELA, another contract loan manager for the ministry.
However, earlier this month, FedLoan Servicing announced that it had reached an agreement with the Department of Education to extend its service contract by one year. As a result, FedLoan will continue to manage numerous federal student loan accounts until 2022, and will also continue to administer the PSLF program.
By the end of 2022, the ministry will transfer borrowers whose loans are managed by FedLoan Servicing to other departments of the Ministry of Education such as MOHELA, Nelnet or Great Lakes Higher Education. Unlike Navient, FedLoan Servicing only manages federal student loans held by the government, so all FedLoan accounts will eventually be transferred to new loan managers by the end of next year.
Other Federal Student Loans Officers
The Department of Education has agreed to a two-year extension of service contracts with several of its other federal student loan service contractors, including Great Lakes Higher Education, Edfinancial, MOHELA, Nelnet and OSLA. Borrowers whose loans are managed by these companies should therefore not see an immediate change in their manager.
What Should Student Loan Borrowers Do About Changes to the Student Loan Service?
Student loan managers are simply entrepreneurs for the Department of Education. Changes to the loan department do not change the ownership of a student loan and do not affect the terms and conditions. The service changes also do not impact a borrower’s eligibility for federal student loan repayment and loan cancellation programs.
Yet changes in the service of student loans have always been disruptive for borrowers. In a published report in 2015 after the last major overhaul of the service, the Consumer Financial Protection Bureau (CFPB) found that “transfers of services can create confusion” and “when errors occur during transfers of services, commentators note that this can affect all aspects of the student loan repayment process leading to problems.
Ministry officials have sought to assure borrowers that this time, service transfers will go more smoothly, but they still urge borrowers to prepare. Borrowers should update their contact details, back up and maintain major student loan records (including important correspondence, payment histories, and other account information), and review and update their direct debit information, which may need to be confirmed or renewed following a loan service. transfer.
Student Loan Forgiveness Changes: Who Qualifies and How to Apply for Biden’s Relief Extension
One month after Biden expands student loan forgiveness program, confusion and uncertainty
Biden’s $ 11.5 billion student loan forgiveness: some automatic, some not. Here is a breakdown.
First wave of borrowers secures $ 715 million in student loan cancellations as part of new program expansion