Less than two weeks after a major overhaul of its student loan service, another US Department of Education student loan service is announcing its completion.
Granite State Management and Resources, which serves over a million student loan borrowers’ accounts, announced that it will suspend student loan servicing operations for the Ministry of Education by the end of the year.
“Yesterday, officials from Granite State Management and Resources notified the US Department of Education’s Office of Federal Student Aid that Granite State would withdraw from the federal student loan service program by December 31, 2021,” said Richard, COO of the Federal Student Aid Program. Cordray in a statement. “The FSA and Granite State will work together to ensure a smooth transition of student loan borrowers to other service personnel.”
The Granite State announcement follows a similar decision by the Pennsylvania Higher Education Aid Authority (PHEAA), whose federal direct loan servicing unit acts as FedLoan Servicing. PHEAA announced earlier this month, he will not renew his contract with the US Department of Education. FedLoan Servicing serves over 8.5 million individual borrower accounts and is also the primary service center tasked with administering TEACH government services loan forgiveness and grants. The FedLoan Servicing contract also expires in December.
The sudden departure of two large student loan organizations from the Department of Education’s huge federal student loan system is likely to be devastating to millions of student loan borrowers. The Biden administration will now have to transfer 10 million or more student loan borrowers’ accounts to other lending institutions. Such transfers of services by contractors of the Ministry of Education have historically was chaotic, with widespread problems including lost records and missed payments.
To complicate matters further, service transfers must occur in the midst of the expiration of the current moratorium on federal student loan payments. The CARES Act, passed by Congress last year in response to the pandemic and recession, temporarily suspended all payments and froze all interest on government federal student loans. Initially, the pause in the payment of the student loan was set for six months, but was extended several times. The current extension of the moratorium by order of President Biden expires on September 30, 2021.
Advocates for student loan borrowers are calling on the Biden administration to extend the moratorium on student loan repayments until 2022, arguing that borrowers and student loan service providers are not ready to switch to regular repayment. The Biden administration has proposed extending the pause in student loan payments, depending on the state of the pandemic and the economy.
Student loan borrowers who are concerned about possible service interruptions should take action now to protect yourself downloading and storing important documentation including payment histories and correspondence, reviewing their contact information, and tracking their credit reports.