By Owen Daugherty, NASFAA Staff Reporter
One of the largest student loan servicers won’t seek to renew its contract with the Department of Education (ED) when its current contract expires at the end of the year.
The Pennsylvania Higher Education Assistance Agency (PHEAA), which administers the Public Service Loan Forgiveness (PSLF) program, reportedly notified ED officials of its decision to not renew its federal student loan servicing contract, which is set to expire on Dec. 14, 2021.
In a statement to NASFAA, PHEAA said the decision would allow it to focus more on its work in Pennsylvania.
"In the 12 years since PHEAA accepted the terms of its federal servicing contract, the federal loan programs, as managed by the U.S. Department of Education, have grown increasingly complex and challenging while the cost to service those programs increased dramatically," PHEAA said.
Several lawmakers have singled out PHEAA for its handling of the PSLF program and the program as a whole for not serving its purpose in providing workers in the public sector with federally-backed student loans the ability to seek forgiveness following 10 years of qualifying payments.
Sen. Elizabeth Warren (D-Mass.), who has been a vocal critic of student loan servicers, and PHEAA specifically, said “millions of borrowers can breathe a sigh of relief that their loans will no longer be managed by PHEAA.”
“PHEAA remains responsible for ensuring these student loan borrowers experience a swift and orderly transition to a new servicer that won’t cheat them – and we are all responsible for fixing our broken student loan system,” she wrote in a post on Twitter.
A recent report from the Consumer Financial Protection Bureau (CFPB) detailed “significant problems” with loan servicers’ handling of the PSLF program, though it did not identify servicers by name.
While it is not immediately clear who will take over handling of the PSLF, ED and Federal Student Aid (FSA) are in the midst of streamlining their student loan servicers as part of the Next Gen FSA Initiative. Due to the impact of the coronavirus pandemic, FSA has paused work on providing intermediate loan servicing providers while it determines who its long-term servicers will be moving forward.
Publication Date: 7/9/2021