Two Student Loan Servicers End Contracts with ED
Within the past month, two major student loan servicers have notified the Department of Education (ED) of their decision to end in December 2021 their contracts to service student loans. FedLoan Servicing, also known as the Pennsylvania Higher Education Assistance Agency (PHEAA), was the first to notify ED of its decision. It was followed two weeks later by the Granite State Management and Resources, which is run by the New Hampshire Higher Education Association Foundation (NHHEAF) Network.
FedLoan Servicing services student loans for approximately 8.5 million student loan borrowers, which represents about 20% of all federal student loan borrowers, while Granite State Management and Resources handles 1.3 million student loan accounts.
The student loan servicing industry has come under heightened public and legal scrutiny following accusations of account mismanagement. For example, FedLoan Servicing is the only servicer responsible for administering the Public Service Student Loan Forgiveness (PSLF) program. With a less than 2% approval rate of PSLF applications, FedLoan Servicing has come under congressional, public and legal scrutiny for its handling of the PSLF program.
Currently, federal student loans have had a “pause” in repayment. However, repayment is slated to restart after Sept. 30. By the end of the year, the federal government will have to transfer over 10 million student loan accounts to other servicers.