16 Million Student Loan Borrowers to Have Loans Transferred to New Servicer
Last month, Navient announced its plan to exit the federal student loan servicing role. Barring objection from Federal Student Aid (FSA), Navient will transfer its Direct loan portfolio to Maximus, a company that currently manages defaulted federal student loans. Navient is the fourth servicer to announce it will no longer service Direct loans for the U.S. Department of Education (ED), bringing the total number of borrowers getting a new servicer to approximately 16.4 million.
Utah Higher Education Assistance Authority - 1 million borrowers.
Granite State - 1.3 million borrowers transferring to Edfinancial.
Pennsylvania Higher Education Assistance Agency (PHEAA/FedLoan Servicing) - 8.5 million borrowers transferring to MOHELA and other servicers (yet to be determined).
Navient - 5.6 million borrowers
The transfer of accounts is happening while loan servicers are also notifying borrowers (who are not currently enrolled in school) that the student loan repayment pause is ending on Jan. 31, 2022. As well, ED recently announced a plan to increase loan servicer performance, transparency and accountability starting next year. The new standards were set in conjunction with the extension of the servicing contracts for six loan servicers through Dec. 2023.
Communications Begin as Repayment Pause Ends — Preparation is Key
FSA and federal student loan servicers are taking proactive steps to communicate with borrowers to help them transition back to repayment. Information is being shared with borrowers via a public service announcement, websites, emails and other communication channels. This preparation is especially important for borrowers who have loans that will be transferred to a new servicer. Here's a quick summary to share with the student loan borrowers in your life.
Update your contact information with your loan servicer and at studentaid.gov.
Watch for a billing statement with details on your payment amount and due date.
Identify which repayment plan best meets your needs and take action to implement it.
Check your auto-debit status to ensure it’s connected to withdraw funds from your proper account.
Understand what happens if you don’t pay your loan: 90+ days without a payment is reported to the three national credit bureaus, and after 270 days, federal loans go into default.
It's also a good idea to download your full payment history from your online servicing account as soon as possible, especially if your loans are held by a servicer whose loan portfolio will be transferred. If you need assistance, contact your servicer.
Do You Know Someone Enrolled in Public Service Loan Forgiveness (PSLF)?
PSLF is an ED program designed to forgive federal student loans for employees of certain public and nonprofit jobs. The media has highlighted PSLF as a troubled program fraught with confusion since its inception in 2007. ED recently announced short-term changes to relax rules and immediately help thousands of borrowers and long-term program renovations that will make it easier for borrowers to navigate the program. Barriers are being eliminated, simplifications are being enacted, data matching with other federal agencies will provide automation and more. Our upcoming blog will delve more into these details.
The student loan servicer that manages the PSLF program, PHEAA/FedLoan Servicing, is exiting the federal program in 2021. To help student loan borrowers traversing PSLF, we suggest borrowers take the following steps to best prepare for the upcoming transition.
Download your full payment history from your online loan servicing account. It may come in handy when a new servicer takes over and it can help you understand any activity on your account.
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