Big Changes in Student Loan Servicing Are Happening Now – Key Details for 2022
The big changes to the student loan department that began last year continue to impact the student loan space. And the changes are on the way. Here’s where things stand and what you need to know.
What is a Student Loan Officer?
A student loan servicer is an entrepreneur who administers a borrower’s student loan account on behalf of the lender or loan holder. In most cases, the manager does not actually own the debt – they are simply hired by the loan holder to manage the account, communicate with the borrower, apply payments and process applications.
To manage its extensive federal student loan system, the US Department of Education contracts out service operations to several organizations. But last year, several of these entrepreneurs announced their withdrawal from the federal student aid system. As a result, the Department has worked to transfer millions of student borrowers to new services. These efforts have been compounded by the continued nationwide pause in payments on most federal student loans. Many borrowers have not had to make payments on their loans or contact their loan officer for almost two years. But that student loan payment break is set to expire on May 1.
Navient Student Loan Service
Last year, Navient and the Department of Education reached an agreement to transfer its entire government-held federal student loan portfolio to Maximus, a separate company that contracts with the department to administer the efforts. collection of overdue loans. The new loan management arm of Maximus is called Aidvantage.
According to a recent report by the Government Accountability Office, the department has now completed the management of transfers from Navient to Aidvantage. But many borrowers who are covered by the ongoing payment pause may not realize that their loan servicer has already changed. Borrowers who are now with Aidvantage can access their accounts through the Aidvantage Web Portal.
Importantly, only Navient federal student loans held by the government were transferred to Aidvantage. FFEL student loans held by companies and private student loans managed by Navient can remain with Navient. Service transfers should not impact a borrower’s eligibility for relief under the recently announced Navient settlement.
FedLoan Service Transfers
The Pennsylvania Higher Education Assistance Agency (PHEAA) administers FedLoan Servicing, which is a major service provider for the Department of Education. FedLoan Servicing is also the Department’s prime contractor to administer the Public Service Loan Forgiveness Program (PSLF).
FedLoan announced its withdrawal from the Department’s loan management system last year, and its contract was due to end in December. However, FedLoan and the Department reached an agreement to extend the contract for another year to allow for a smoother transition to new loan managers.
Service of transfers from FedLoan to other loan servicers is ongoing. According to the Government Accountability Office, in January the Department transferred just over a third of FedLoan accounts to various other providers, including Navient (now Aidvantage), Nelnet, Great Lakes Higher Education and MOHELA. Transfers will continue and are expected to be completed by this summer. Importantly, MOHELA – another Ministry of Education loan manager – is expected to take over the PSLF program.
Other Student Loan Managers
Granite State Management & Resources, another Ministry of Education loan servicer, has exited the government service system and transfers to other loan servicers are now complete.
Other major Department of Education loan servicers, including Nelnet, Great Lakes Higher Education and MOHELA, have extended their contracts with the government and are not expected to leave the federal student loan servicing space in the immediate future.
What to do about changes to Student Loans Service
Borrowers who are unsure if their federal student loan officer has changed can obtain up-to-date information about their loan officer through their StudentAid.gov portal. Make sure your contact information, including your mailing address and email address, is up-to-date in order to receive important communications. Borrowers whose servicers have not yet changed may want to take the opportunity to upload and retain important documents and correspondence, such as payment histories and key letters.
Borrowers who were on direct debit prior to the Covid-related payment pause may need to reinstate or reaffirm their direct debit agreements with their new servicer. And even if your handler hasn’t changed, the Government Accountability Office has advised that borrowers may still need to reaffirm an automatic debit agreement before the end of the payment break on May 1.
Further Reading on Student Loans
Here’s what student loan repayment will look like in May, after the payment break ends
Biden could ‘make a decision now’ on student loan forgiveness, says key senator
Biden administration touts $15 billion in student loan forgiveness for 675,000 borrowers – more to come?
Student Loan Forgiveness Updates: New Changes Coming in 2022 for Public Service Borrowers