By Owen Daugherty, NASFAA Staff Reporter
The Education Department (ED) will be looking for at least two new student loan servicers next year, as the New Hampshire Higher Education Association Foundation (NHHEAF) announced this week that it won’t seek to renew its contract with ED when its current one expires at the end of the year.
NHHEAF operates under the name Granite State Management & Resources as a student loan servicer and its contract with the department is set to expire December 31.
Following the announcement from NHHEAF and recent news that the Pennsylvania Higher Education Assistance Agency (PHEAA) won’t be renewing its contract, ED will now be tasked with finding new loan servicers for the student loan accounts of roughly 10 million borrowers.
Federal Student Aid Chief Operating Officer Richard Cordray said in a statement that the department will work with Granite State to transition borrowers to a new servicer.
“Our wind-down plan will include early and frequent communications and clear guidance about what borrowers should expect,” Federal Student Aid Chief Operating Officer Richard Cordray said in a statement. “Additionally, FSA will provide strong oversight and hold servicers accountable for making sure borrowers are supported and not harmed during this transition.”
Cordray, former head of the Consumer Financial Protection Bureau, has called for more oversight of servicers. In announcing its plan not to renew its contract with ED, PHEAA noted “the federal loan programs, as managed by [ED], have grown increasingly complex and challenging while the cost to service those programs increased dramatically."
A spokesperson for NHHEAF told NASFAA that it will work with ED and the new servicer to notify each borrower of the change. The spokesperson added that NHHEAF currently services 1.3 million borrowers under the contract with ED, and of those, 6,500 are New Hampshire residents.
ED “will work to determine the timing of the transfer process for the federal loans we are currently servicing, as well as which federal contractor will assume the servicing role for this portfolio,” spokesperson Danielle Barrick said in an email.
The decision “reflects our desire to move away from the increasing uncertainty of the federal student loan program – made all the more so by the global pandemic — and toward a greater alignment of our resources with our purpose,” Barrick added.
Many are concerned the loss of the servicers paired with the fact that student loan payments for tens of millions of borrowers are set to resume in a little more than two months will lead to confusion for borrowers and potentially a rise of those in default on their loans.
Lawmakers have for weeks been pushing ED and President Joe Biden to issue another extension in the payment pause to afford servicers more time to communicate with borrowers. The announcement from NHHEAF further complicates the matter. About 1 in 4 borrowers with a federal student loan will be under a new servicer come next year, and payments will be resuming after more than 18 months.
Publication Date: 7/21/2021