A large student loan company quits. FedLoan Servicing, formally Pennsylvania’s Higher Education Support Agency, serves student loans to an estimated 8.5 million student loan borrowers – about 20% of all federal student loans.
FedLoan is the only company to service loans under the Public Service Loan Forgiveness (PSLF) program.
PSLF allows borrowers in government or non-profit organizations to cancel a certain portion of their loans. The company said it will no longer renew its contract with the federal government to service these loans, which means its borrowers will soon have new service personnel.
“Is the department going to appoint another PSLF service person, or are they just going to distribute it among several service companies?” asked Betsy Mayotte, president of the Student Credit Counseling Institute.
The timing for this announcement is not ideal: millions of borrowers are not making payments right now due to the pause imposed by the pandemic.
Seth Frothman, executive director of the Student Borrower Protection Center, said that as payment processing resumes, all borrowers, regardless of their service organization, need to take steps to protect themselves. “Request a copy of their payment history, download whatever they can from their account, and keep their contact information up to date,” Frotman said.
FedLoan’s current contract expires on December 14th. The pause in the payment of student loans and interest could expire as early as September 30th.