One of the nation’s biggest student loan servicers is pulling out. Where does that leave borrowers?
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A major student loan servicer is calling it quits. FedLoan Servicing, formally the Pennsylvania Higher Education Assistance Agency, services student loans for approximately 8.5 million student loan borrowers — about 20% of all federal student loans.
FedLoan is the only company that services loans for the Public Service Loan Forgiveness program, or PSLF.
The PSLF lets borrowers who work in public service or for a non-profit get a certain portion of their loans cancelled. The company has said it will not renew its contract with the federal government to service those loans anymore, meaning its borrowers will soon have a new servicer.
“Is the department going to designate another PSLF servicer or are they just going to spread it out amongst multiple servicers?” asked Betsy Mayotte, the president of The Institute of Student Loan Advisors.
The timing of this announcement is not ideal: Millions of borrowers aren’t making payments right now because of a pause put in place due to the pandemic.
Seth Frotman, executive director of the Student Borrower Protection Center, said that as payment processing is ramped back up, all borrowers, regardless of their servicer, need to take steps to protect themselves. “Requesting a copy of their payment history, downloading whatever they can from their account, and making sure that their contact information is up to date,” Frotman said.
FedLoan’s current contract will expire December 14. The pause on student loan payments and interest could expire as soon as September 30.
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