Two federal student loan servicing operators have announced plans to waive their government contracts at the end of 2021, and the US Department of Education will have to transfer loans to nearly 10 million borrowers to other service providers.
The Pennsylvania Higher Education Promotion Agency (PHEAA), which acts as FedLoan Servicing, announced on July 9 that he will not renew his 12-year federal loan servicing contract expiring on December 14, 2021. Granite State Management & Resources, which is part of the non-profit network of the New Hampshire Higher Education Association Foundation (NHHEAF), will also waive the contract. to focus on managing private student loans, according to Press release July 19…
Experts fear the move will cause confusion among federal student loan borrowers, especially as it coincides with the resumption of student loan payments on October 1. Keep reading to see if your student loan will make an impact and find out how you can prepare for the transition to the new service staff.
If you are worried about keeping up with your student loan payments when the abstinence period comes to an end, consider refinancing your private student loans with Credible reduce monthly payments at low interest rates. This will help you pay off other debts on time, including your federal student loan debt.
Has your service center turned down student loans?
If your student loans are served by FedLoan Servicing or Granite State Management & Resources, then by the end of the year your loans will be transferred to new federal loan servicing staff. It will not affect your loan repayment plan such as interest rate, loan balance or monthly payments.
FedLoan service was recently sued for allegedly preventing government employees from forgiving or reducing their student loans under the Public Service Loan Forgiveness (PSLF) program. Federal loan programs “are becoming more complex and difficult, while the cost of servicing those programs is increasing dramatically,” service staff said.
By buying private student loans, compare interest rates of several lenders on an online marketplace like Credible to get the lowest bid possible for your situation.
What happens if your loans get hurt
With the resumption of student loan payments in October and the transfer of millions of borrowers to new service centers around the same time, the Federal Student Aid Office (FSA) is working to reduce confusion among the changes so that borrowers do not default on their loans.
While the Department of Education has a plan for your federal student loans, it is important that you prepare your finances for the transitions this year. Here are a few things you should do before resuming your student loan payments:
- Make sure your contact information is up to date. Contact your loan agent and FSA to make sure they have your correct physical address, email address, and phone number so you don’t miss out on any important mail.
- Check if your account has automatic payments. If your federal student loans are set to direct debit through your bank account, then your first payment will be charged in October. Make sure you have enough money in your account to pay off your student loan.
- Sign up for an Income-Driven Repayment (IDR) plan, or a deprivation refraining plan. If you can’t afford your first payout in October, check out the unemployment grace or cut benefits options in FSA website…
Finally, you may want to consider refinancing your private student loans, although interest rates have historically been low. This will help you pay off debt faster, lower your monthly payment, and save money on student debt interest.
One caveat: refinancing your federal loans is not advised as this will strip you of your eligibility for federal protections such as IDR plans and student loan forgiveness. Before refinancing, make sure your debt is with a private lender.
Contact a knowledgeable loan officer at Credible to discuss repayment options so you can decide if refinancing is right for you…
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