About 2 million federal student loan borrowers, many of whom are seeking debt relief from the Public Service Loan Forgiveness program, will get a new federal student loan servicer as soon as early July.
FedLoan – an arm of the Pennsylvania Higher Education Assistance Agency known as PHEAA – is currently servicing those loans.
But a year ago, PHEAA decided to end its contract with the federal government. Beginning last fall, the federal loans serviced by FedLoan have been transferred in stages to several other servicers. About 2 million accounts still need to be transferred.
In July, loans held by borrowers enrolled in the Public Service Loan Forgiveness program will start being transferred to the Missouri Higher Education Loan Authority, known as MOHELA. These transfers will continue throughout the summer, according to the Department of Education.
In recent years, FedLoan was tasked with handling the loans for every borrower seeking debt relief from the Public Service Loan Forgiveness program, which cancels the debt of government and nonprofit workers after making 10 years of qualifying payments. Once a borrower indicated they want to enroll in the program, their loans were transferred to FedLoan.
But FedLoan drew criticism from borrower advocates for making errors and providing misinformation to borrowers about the qualifications. In 2021, PHEAA settled a lawsuit brought by Massachusetts Attorney General Maura Healey, alleging the loan servicer violated state and federal consumer protection laws. PHEAA agreed to provide individual audits to all 200,000 Massachusetts borrowers it services.
Last year, the Biden administration temporarily expanded eligibility for the Public Service Loan Forgiveness program to include borrowers who have older loans that didn’t originally qualify as well as those who were in the wrong repayment plan but met the other requirements. By the end of May, the Department of Education had approved forgiveness for close to 145,000 borrowers under this waiver.
What borrowers can expect
Public Service Loan Forgiveness borrowers can expect to receive several notices as their loans are transferred.
A notice from FedLoan is expected to be sent at least 15 days before the transfer occurs, followed by a welcome notice from MOHELA once the transfer is complete.
Borrowers’ full account details should be available from MOHELA no later than 10 business days after the loan transfer date included in the transfer notification sent from FedLoan, according to the MOHELA website.
The loans are being transferred, not sold. That means the change will not impact the existing terms, conditions, interest rates, loan discharge or forgiveness programs, or available repayment plans on the loans. The repayment plan a borrower is enrolled in does not change once transferred unless the borrower opts to make a change.
Borrowers are not required to do anything during the transfer process.
FedLoan also services some non-PSLF borrowers. The vast majority of those accounts have already been transferred from FedLoan to other loan servicers, including Aidvantage, EdFinancial or Nelnet.
Two other loan servicers also ended their contracts with the Department of Education last year. Loans serviced by Navient were transferred to Aidvantage and loans that were serviced by Granite State were transferred to Edfinancial Services. Those transfers were complete by the end of 2021.
The Department of Education post updates about PSLF processing and loan transfers to its website Studentaid.gov.
How to qualify for the PSLF waiver
To take advantage of the temporary PSLF waiver, some borrowers may need to take action by October 31.