What Navient and FedLoan borrowers should know as major changes in student loan service loom
Navient is just the latest major national student loan manager to decide not to renew his contract with the US Department of Education. In July, FedLoan Servicing – the direct loan management wing of the Pennsylvania Higher Education Assistance Agency (PHEAA) – also announced that it would not renew its loan management contract. FedLoan manages an additional 8.5 million borrower accounts, many of which are on track for the civil service loan forgiveness program, and the ministry will also need to transfer those accounts to a new loan manager. Two smaller loan managers – Granite State Management and Resources earlier this year and Cornerstone last year – have also announced departures.
According to the Consumer Financial Protection Bureau, changes to the student loan service may be disruptive for borrowers, and can sometimes cause problems. Here’s what you need to know.
Student loans that will be affected by service changes
Navient and the PHEAA manage many types of student loans, and it’s important to understand that only certain student loans will be affected by the service changes. More specifically, service changes only affect federal student loans held by the US Department of Education. This includes the following:
- Direct Federal Student Loans, including Direct Stafford Loans, Direct Graduate PLUS Loans, and Direct Consolidation Loans.
- Federal Direct Parent PLUS Loans.
- Federal Family Education Loan Program (FFEL) loans owned or held by the government (not all FFEL loans are government owned).
Navient offers many private student loans, as well as FFEL loans that are not owned by the government. These loans should not be affected by the service changes.
On the other hand, the entire FedLoan Servicing portfolio is made up of federal student loans held by the government, so if FedLoan Servicing is your manager, you will be impacted by the changes. However, the PHEAA also operates American Education Services (AES), which manages private student loans and FFEL loans that are not owned by the government. These loans are expected to remain unchanged.
Who will be your new student loan officer?
In its announcement yesterday, Navient said it has struck a deal with another company called Maximus, which intends to take over Navient’s 6 million student loan accounts. Maximus is another contracted service provider for the Department of Education, primarily dealing with its defaulting federal student loan portfolio. Navient’s deal with Maximus is not final, however, and the ministry must give final approval for it to move forward.
In contrast, FedLoan’s departure from the Federal Student Loans Service did not include a transfer agreement with another company. As a result, we do not yet know which company (or firms) will take over the accounts of the student loan borrowers from FedLoan. The ministry is reportedly working on bridging contracts with other student loan managers – short-term arrangements to take over FedLoan accounts – but nothing has been finalized yet.
When will your student loans transfer to a new student loan manager?
No entity – not Navient, Maximus, FedLoan or the Ministry of Education – has announced a timetable for the service transfers. It is therefore not known exactly when the transfers will take place.
That said, FedLoan’s contract with the ministry ends in December, and student loan payments are expected to resume after January 31, 2022, following President Biden’s final extension of the student loan payment hiatus. There is speculation that the transfers should take place by then – but nothing is set in stone yet.
The terms and conditions of student loans will not change
A federal student loan manager is an entrepreneur operating on behalf of the federal government. The ownership of your student loans does not change, and neither does the underlying terms. Borrowers will be able to access the same federal student loan programs, such as income-based repayment plans, public service loan forgiveness, and deferral and forbearance options, regardless of who manages their loans. federal student loans.
Prepare Now for Student Loan Service Changes
To minimize the risk that a service transfer will be disruptive or cause problems, borrowers can take steps now to protect themselves:
- Update your contact details so you don’t miss any matches.
- Print, download, or keep key records, including payment histories and important correspondence.
- Update your direct debit if you’ve already set it up and be ready to re-establish direct debit with your new loan service once the transfer is complete.
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