A new student-loan company is now taking over the accounts of public servants seeking debt cancellation

A new student-loan company is now taking over the accounts of public servants seeking debt cancellation
·3 min read
  • Student-loan borrowers in a public service loan forgiveness program will soon make payments to a new company.

  • They should be notified 15 days in advance of the transfer from FedLoan Servicing, which is ending its contract.

  • This also comes as borrowers have 4 months left to apply for extended student-loan relief.

The student-loan industry is undergoing a series of changes, and public servants are a major part of them.

Federal student-loan borrowers enrolled in the Public Service Loan Forgiveness (PSLF) program, which forgives student debt for nonprofit and government workers after ten years of qualifying payments, have been paying their debt to FedLoan Servicing — a student-loan company that is ending its federal servicing contract this year. Beginning early July, according to Federal Student Aid, those accounts will be transferred over to a new company, MOHELA, that is expected to take control over PSLF and any progress borrowers have made toward forgiveness.

According to Federal Student Aid, the transfers will continue throughout the summer and will not require any additional action on the part of the borrower. If you are enrolled in PSLF, here's what you need to know:

  • You should receive notice of your transfer at least 15 days before it occurs, and a notification from MOHELA once your transfer is complete.

  • If you qualify for loan forgiveness during this timeframe, the discharges will still occur, and if all of your loans are forgiven, you will not be included in the transfer.

  • And if you applied for PSLF for the first time after May 1, 2022, it will be processed by MOHELA.

The Pennsylvania Higher Education Assistance Agency — the division of FedLoan that has been managing PSLF up to this point — is officially ending its contract on December 14, and a spokesperson at the time told Insider the company would work to "ensure a smooth transition for all borrowers beyond that date — for as long as it takes under the Department's direction."

But lawmakers and advocates have slammed PHEAA for mismanagement of PSLF, leaving borrowers potentially eligible for forgiveness with growing debt and minimal guidance. When it announced it was ending its contract, Massachusetts Sen. Elizabeth Warren said that "borrowers can breathe a sigh of relief today knowing that their loans will no longer be managed by PHEAA, an organization that has robbed untold numbers of public servants of debt relief and was recently caught lying to Congress about its atrocious record of fines and penalties."

Leading up to Biden's presidency, 98% of PSLF applicants were rejected from the program. As a result, the Education Department announced reforms to the program in October, including a waiver through October 31, 2022 that would allow any past payments, including those previously ineligible to the program, to qualify for relief. But that waiver is just four months away, meaning those borrowers have to risk an account transfer subject to administrative errors — along with a rush to receive limited-time relief.

Advocates recently called for an extension of the waiver, with American Federation of Teachers President Randi Weingarten saying that "this is not the time to cut corners in getting that relief to as many people as possible, which is why President Biden must extend the limited PSLF waiver and support us in helping our members access PSLF,"

Meanwhile, Biden is also in the process of making a decision on broad student-loan forgiveness for federal borrowers. He is reportedly considering $10,000 in relief for those making under $150,000 a year, likely to be announced in July or August, closer to when the student-loan payment pause expires after August 31.

There's a lot of uncertainty surrounding what's in store for student-loan borrowers in the coming months, but with millions of account transfers, potential student-loan relief, and resumption of payments, it's clear the Education Department has a lot on its plate.

Read the original article on Business Insider