About 2 million people will soon have a new company take care of their student loans. Here’s what you need to know

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About 2 million people with federal student loans will get a new loan servicer as soon as early July. Many of these people are looking for debt relief through the Public Service Loan Forgiveness program.

These loans are being taken care of by FedLoan, which is a part of the Pennsylvania Higher Education Assistance Agency (PHEAA).

But PHEAA decided a year ago to stop working with the federal government. Since last fall, the federal loans FedLoan was taking care of have been given to several other services in stages. There are still about 2 million accounts that need to be moved.

Borrowers in the Public Service Loan Forgiveness program will start having their loans transferred to MOHELA, which stands for Missouri Higher Education Loan Authority, in July. The Department of Education says that these transfers will keep happening all through the summer.

In recent years, FedLoan was given the job of handling the loans of every borrower who wanted debt relief from the Public Service Loan Forgiveness program. This program cancels the debt of people who work for the government or a nonprofit after they’ve made 10 years of payments that meet certain requirements. As soon as a borrower said they wanted to join the program, their loans were moved to FedLoan.

But FedLoan was criticized by advocates for borrowers for making mistakes and giving borrowers wrong information about their qualifications. In 2021, PHEAA settled a lawsuit that Massachusetts Attorney General Maura Healey had filed against the loan servicer. In the suit, Healey said that the loan servicer had broken state and federal laws that protect consumers. PHEAA agreed to give each of the 200,000 Massachusetts borrowers it works with a personal audit.

Last year, the Biden administration temporarily made the Public Service Loan Forgiveness program open to borrowers with older loans that didn’t qualify at first and those who were in the wrong repayment plan but met the other requirements. By the end of May, the Department of Education had agreed that close to 145,000 borrowers could get their loans forgiven under this waiver.

What to expect as a borrower

Forgiveness of Public Service Loans Borrowers can expect to get a few notices as their loans are moved from one place to another.
FedLoan should send a notice at least 15 days before the transfer, and then MOHELA should send a welcome notice once the transfer is done.

MOHELA’s website says that full account information for borrowers should be available no later than 10 business days after the loan transfer date listed in the FedLoan transfer notification.

The loans are being transferred, not sold. The adjustment won’t affect loan terms, conditions, interest rates, discharge or forgiveness programs, or repayment plans. Once transferred, a borrower’s repayment plan doesn’t change unless the borrower opts to make a change. During the transfer process, Borrowers are to do nothing.
FedLoan helps non-PSLF borrowers. Most of these accounts have been transferred from FedLoan to Aidvantage, EdFinancial, or Nelnet.

Two additional loan servicers discontinued their contracts with the Department of Education last year. Navient were transferred to Aidvantage and Granite State loans to Edfinancial Services. These transfers ended in 2021.
Studentaid.gov provides updates on PSLF procedures and loan transfers.

How to get a waiver from the PSLF

  • Some borrowers may have to act by October 31 in order to take advantage of the temporary PSLF waiver.
  • In order to qualify for a Direct Loan, borrowers who previously had a non-qualifying loan such as the Federal Family Education Loan must consolidate their debt into one and then complete a PSLF form by the October deadline. The new loan will be handed to MOHELA after consolidation is complete.
  • There is no need to do anything if you are currently being served by FedLoan and are registered in the PSLF program. Over the summer, their loans will be automatically transferred to MOHELA.
  • Newly qualified PSLF students are still being counted by the Department of Education as they analyze their past contributions. This waiver means that it doesn’t matter what type of federal student loan a borrower has, or what payment plan they’re on, as long as they’re eligible to receive federal student loans. If the borrower worked full time for a qualified job, all payments will be eligible for the PSLF program.

More changes could be coming for federal student loan borrowers

Federal student loans are being transferred from FedLoan to MOHELA this summer as borrowers wait to hear if President Joe Biden will prolong the pandemic-related payment freeze or eliminate student loan debt.

After March 2020, federal student loan payments will begin on August 31. Federal student loan balances are locked. Interest and debt collections have ended.
Biden has prolonged the break multiple times and is under political pressure to delay the resume date, which is two months before the midterms.

The president is also under pressure to cancel student loans. Biden suggested student loan relief in April.

He stated he’d forgive $10,000 while campaigning. White House sources said he may impose an income criteria to exclude high-earning debtors from debt relief.

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