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Your Student Loan Servicer Is About To Change, If You Are On Track For This Key Loan Forgiveness Program

Buckle up — millions of borrowers who are on track for a key student loan forgiveness program for public service workers are about to be transferred to a new student loan servicer. Here’s what you need to know.

How Federal Student Loan Servicing Works

A student loan servicer is essentially an agent or contractor hired by a lender to administer student loan accounts on their behalf. Usually, a student loan servicer does not actually “own” the loan. Rather, it is a hired entity to manage borrower accounts, communicate with borrowers, process payments, and review requests.

To administer its sprawling federal student loan system, the U.S. Department of Education contracts out servicing operations to several companies. But over the course of the last two years, there has been significant upheaval within the federal student loan servicing system. Several major loan servicers have withdrawn, while other loan servicers have been brought in or had their role expanded. For example, Navient — one of the Department’s major student loan servicers — began to withdraw from the federal student aid system last year; the Department completed transfers of borrower accounts from Navient to Aidvantage — a new loan servicer — earlier this year.

Loan servicing transfers have historically been disruptive for borrowers, and sometimes key information or records about borrower accounts are lost in the shuffle. Servicing transfers can also be confusing for borrowers.

This year, that confusion may only be compounded by the ongoing national payment pause on most federal student loans, which has been in effect for over two years. Most federal student loan borrowers have not had to make payments or communicate with their loan servicer since March 2020. The pause on payments is currently set to end on August 31, 2022, but could be further extended.

New Student Loan Servicer Will Take Over PSLF Program

The Pennsylvania Higher Education Assistance Agency (PHEAA) operates FedLoan Servicing, which has been a major contractor for the Department of Education. In particular, FedLoan Servicing is the government’s primary contractor to administer Public Service Loan Forgiveness (PSLF) — a key federal student loan forgiveness program that can allow borrowers to get their loans forgiven after 10 years of qualifying payments while working full-time for nonprofit or government organizations.

FedLoan announced last year that it would be withdrawing from the Department’s loan servicing system. Its federal contract was scheduled to expire in December, but FedLoan and the Education Department reached an agreement to extend it through 2022 to allow for a smoother transition. Millions of borrowers who have FedLoan accounts have already had their loans transferred to several other Department-contracted loan servicers such as EdFinancial and Nelnet

But borrowers on track for PSLF have continued to remain with FedLoan, particularly as the Department implements the Limited PSLF Waiver — a temporary initiative by the Biden administration that eases PSLF rules and will allow the Education Department to retroactively count more qualifying payments for borrowers, bringing millions closer to student loan forgiveness.

That is about to change. On June 3, the Education Department confirmed that starting this summer, PSLF borrowers will be transferred from FedLoan to MOHELA, one of the Department’s other student loan servicers. MOHELA will be taking over administering the PSLF program.

“Beginning in early July, the first transfers of Public Service Loan Forgiveness (PSLF) borrowers from FedLoan Servicing to MOHELA will occur,” said the Department in an announcement on June 3. “These transfers will continue throughout the summer, and no action is required from you during this process.”

What PSLF Borrowers Should Know About The Student Loan Servicing Transfer from FedLoan to MOHELA

According to the Department of Education, borrowers will receive several notices as the transfers take place, both before the transfer happens and after.

The Department also indicates that borrowers who have submitted PSLF certification forms or applications should not worry about disruptions.

“PSLF discharges for borrowers who meet all eligibility requirements will continue to occur during the transfer timeframe,” says the Department. “If you submitted a PSLF form for the first time after May 1, 2022, your form will be sent to MOHELA for processing after July 1, 2022. Once your PSLF form is processed, your account will be transferred from your current servicer to MOHELA.”

Borrowers who get their loans forgiven under PSLF before the transfer occurs will not get transferred to MOHELA, according to the Department.

“Federal Student Aid is committed to keeping borrowers informed about the transition of Public Service Loan Forgiveness (PSLF) servicing from FedLoan Servicing to MOHELA,” said Richard Cordray, Chief Operating Officer of Federal Student Aid, in a tweet on Tuesday.

If you are unsure whether your federal student loan servicer has changed, you can get key information on your loan servicer through your StudentAid.gov portal. In the meantime, borrowers should make sure that their contact information (including mailing address and e-mail address) are current. It may also be a good idea to download and retain key records and correspondence, like payment histories, PSLF payment counts, and other important letters.

Further Student Loan Reading

5 Things Borrowers Should Know About Biden’s $25 Billion In Student Loan Forgiveness

Student Loan Pause: Biden Officials Hint At Another Extension, Potentially Tied To Student Loan Forgiveness

560,000 Borrowers Will Get Automatic Student Loan Forgiveness, But Others Can Still Apply For Relief

Biden’s New Student Loan Forgiveness Changes May Wind Up Costing Some Borrowers