Loan Benefit

Student loans: 9 million borrowers benefit from a new service. here’s why

By Judy D. Kenny


The Pennsylvania Higher Education Assistance Agency (PHEAA), better known as FedLoan – its branch that handles federal student debt – has been hired by the government to collect payments for the past 12 years. It is currently one of the four main services the Department of Education uses, processing more than $ 400 million in student loans, or about a quarter of the total federal student debt portfolio.

Since the PHEAA began managing federal loans in 2009, repayment programs “have become increasingly complex and difficult as the cost of servicing these programs has increased dramatically,” the organization said in a statement. .

In recent years, FedLoan has been tasked with managing the loans of each borrower seeking Public Service Loan Forgiveness, a federal program that cancels the remaining debt of those working in the public sector, such as nurses and social workers, after have made 10 years of payments. .
Most of the people who asked for debt relief under the program were turned down. Some borrowers, after making 10 years of payments, found they didn’t have the right kind of federal student loan, didn’t have the right repayment plan, or worked for an employer who didn’t. was not eligible for a discount. Others just haven’t made enough payments yet. The program was created in 2007, making 2017 the first time someone would have made enough payments to qualify.
The PHEAA has been criticized by borrower advocates for making mistakes and providing misinformation to borrowers about qualifications. Earlier this year, he settled a lawsuit brought by Massachusetts Attorney General Maura Healey alleging he violated federal and state consumer protection laws. The PHEAA has agreed to provide individual audits to all 200,000 Massachusetts borrowers it serves.

The server has also been the target of Massachusetts Democratic Senator Elizabeth Warren, who said in a statement Thursday that borrowers “can breathe a sigh of relief today knowing that their loans will no longer be managed by the PHEAA.”

At a congressional hearing in April, Warren accused the PHEAA of under-counting payments. CEO James Steeley told lawmakers this was wrong.

What happens next?

The PHEAA informed the Education Ministry on Thursday that it would not renew his contract after it expired on December 14. At this time, it is not known which organization or company will handle the loans next.

Rich Cordray, director of operations for Federal Student Aid in the Department of Education, said in a statement that PHEAA has agreed to work with the government to develop a “liquidation plan to ensure a smooth transition for borrowers to another loan service “.

The agency has also agreed to continue working with Federal Student Aid until all borrowers have transferred to another lending agency – even if that is beyond Dec. 14, Cordray added.

Payments on federal student loans are currently on hold until October 1 for all borrowers due to a freeze initially put in place by Congress last year to help borrowers during the pandemic. The benefit was then extended by the Trump and Biden administrations. Leading Democratic lawmakers have called on President Joe Biden to extend the break for another six months.


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Judy D. Kenny
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