The company that manages your federal scholar loans might change quickly
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The Pennsylvania Higher Education Assistance Agency – which oversees the loans of 8.5 million student borrowers – announced that it will not renew its contract with the federal government if it ends later this year.
Consumer advocates applauded the news because PHEAA, a quasi-state student aid organization founded by the Pennsylvania General Assembly in 1963, was accused of providing borrowers with misleading information and making it difficult for them to access aid programs.
According to recent data, only around 5% of borrowers who applied for the PHEAA-managed national public service lending program have been approved.
The agency, known as FedLoan to Borrowers, is one of several companies the Department of Education pays to manage the government’s $ 1.59 trillion student loan portfolio.
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“Student loan borrowers across the country, including millions of teachers and other civil servants, have received the welcome news that the Department of Education will no longer rely on a company accused of widespread mismanagement and abuse to sell student loans from millions of borrowers, ”Seth Frotman, executive director of the Student Borrower Protection Center, said in a statement.
PHEAA’s contract with the government ends on December 14, 2021.
“In the 12 years since PHEAA accepted the terms of its federal service contract, the federal loan programs administered by the US Department of Education have become increasingly complex and demanding, while the cost of running those programs has risen dramatically,” said Keith New. a spokesman for PHEAA.
What the change means for borrowers
If your state student loans are currently being serviced by PHEAA, you will be matched with a new lender, college expert Mark Kantrowitz said.
You should make sure that the new servicer has all of your correct information.
Most federal student loan borrowers won’t have to pay their student loans until October thanks to a pandemic-era relief policy. But if you resume payments, you’ll want to keep making them to PHEAA until you find out about your new lender, experts say.
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This is especially important for borrowers seeking government debt relief, as with each payment they are approaching the 120 payments required to cancel their debt. A record of your payments can also protect you.
“Borrowers should keep a table for each payment with the date of the payment, the amount of the payment, the repayment schedule and the eligible location,” said Kantrowitz. “If there are ever any problems, this table will be helpful in solving them.”
If you don’t like your new servicer, you can switch by consolidating your federal loans. However, this can reset your repayment date, “he said.” So if your aim is to get public service loans, I do not recommend it. “
Most state student loan service providers also fare similarly, Kantrowitz said. “Changing service technicians can mean jumping from the frying pan into the fire with no real improvement.”
Still, borrowers who have problems with their service provider should file a complaint with the Consumer Financial Protection Bureau.