A major student loan servicer has announced that it has struck a short-term agreement with the Department of Education (ED) in an effort to create a “smooth transition” for borrowers who will need to have their accounts reassigned.
The Pennsylvania Higher Education Assistance Agency (PHEAA), which services borrowers in the Public Service Loan Forgiveness (PSLF) program, recently announced that instead of fully exiting its servicing contract, it would instead extend its partnership with Federal Student Aid (FSA) through December 2022 as a way of providing an orderly and timely transfer of borrowers to successor servicers.
The student loan servicer still plans to end its contract with ED, slated to expire on Dec. 14, 2021, but said they were supportive of a short-term extension in order to better aid the transition process for borrowers.
“PHEAA was clear that it would entertain a short-term extension as necessary to ensure a smooth transition for 8.5 million federal borrowers that include PSLF and TEACH borrowers,” the servicer wrote in its announcement. “This contract extension, which will end in December 2022, provides that all loans will be successfully transferred from PHEAA to other servicers before that date.”
While the short-term extension offers some buffering in terms of reassigning borrowers whose servicers plan to end their contracts, FSA still must contend with transitioning these accounts ahead of borrowers resuming their repayments at the start of 2022, following a near two-year payment pause on federal student loans.
There are a multitude of factors at play that could complicate borrowers’ transition back into repayment, but ED has pledged to ramp up communications in the coming weeks to keep borrowers informed as to how they will be impacted by the changes to the student loan landscape.
In the meantime, FSA is urging borrowers and financial aid professionals to stay vigilant over potential scams aimed at taking advantage of students.
Higher ed partners: Remind borrowers they never have to pay for help with their federal student loans. Our loan servicers assist borrowers for FREE! Encourage borrowers to visit https://t.co/UifHAqeVgP to learn how to spot a student aid scam. pic.twitter.com/K3Gwf0ywmI— Richard Cordray (@FSACOO) October 19, 2021
Stay tuned to Today’s News for more updates on the servicer transition and the end of the federal student loan moratorium.
Publication Date: 11/17/2021