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The Pennsylvania Higher Education Aid Agency – which oversees the loans of 8.5 million student borrowers – has announced that it will not renew its contract with the federal government when it ends later this week. year.
Consumer advocates have applauded the news because PHEAA, a quasi-government student aid organization established in 1963 by the Pennsylvania General Assembly, has been accused of providing borrowers with misleading information and making it harder to get credit. access to assistance programs.
About 5% of borrowers who applied for the National Civil Service Loan Cancellation Program, administered by the PHEAA, were approved according to recent data.
The agency, known to borrowers as FedLoan, is one of several companies the Department of Education pays to manage the government’s $ 1.59 trillion student loan portfolio.
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“Student loan borrowers across the country, including millions of teachers and other public service workers, have received the good news that the Education Department will no longer rely on a company accused of mismanagement and widespread abuse to manage millions of student borrowers’ loans, mentioned Seth Frotman, executive director of the Student Borrower Protection Center, in a statement.
PHEAA’s contract with the government will end on December 14, 2021.
“In the 12 years since PHEAA accepted the terms of its federal service contract, federal loan programs, as administered by the US Department of Education, have become increasingly complex and difficult, while the cost of servicing these programs has increased dramatically, ”said Keith New, spokesperson for PHEAA.
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What the change means for borrowers
If your federal student loans are currently managed by the PHEAA, you’ll be matched with a new lender, a higher education expert said. Marc Kantrowitz.
You’ll want to make sure the new repairman has all of your correct information.
Most federal student loan borrowers don’t have to make payments on their student loans until October, thanks to a pandemic relief policy. But when you resume payments, you’ll want to keep paying them to the PHEAA until you know your new lender, according to experts.
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This is especially important for borrowers seeking utility loan forgiveness, as each payment brings them closer to the 120 payments needed to get their debt forgiven. Keeping a record of your payments can also protect you.
“Borrowers should keep a spreadsheet showing, for each payment, the payment date, payment amount, repayment plan, and eligible employment,” Kantrowitz said. “If there are any issues, this spreadsheet will be helpful in solving them. “
If you don’t like your new manager, you can change this by consolidating your federal loans. However, it can reset your repayment schedule, ”he said. So if you’re looking for a utility loan discount, I don’t recommend doing it. ”
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Additionally, most federal student loan managers operate the same, Kantrowitz said. “Changing service attendant can be like jumping from a frying pan into a fire, with no real improvement. “
Nonetheless, borrowers who have problems with their service agent should file a complaint with the Consumer Financial Protection Bureau.
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