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How Student Loan Servicing Changes Will Impact Public Service Loan Forgiveness



Last week, the Pennsylvania Higher Education Assistance Authority (PHEAA), whose federal Direct loan servicing wing operates as FedLoan Servicing, announced that it would not be renewing its contract with the U.S. Department of Education. FedLoan Servicing is one of the Department’s main contracted student loan servicers, handling over 8.5 million individual borrower accounts. FedLoan’s contract with the Department is scheduled to expire in December. pg

FedLoan Servicing’s abrupt departure from the Department of Education’s sprawling federal student loan system will likely be disruptive to millions of student loan borrowers, who will have their accounts transferred to a new loan servicer in the coming months (the specific servicer, or servicers, that will take over FedLoan’s accounts has not yet been determined). Servicing transfers by third parties contracted with the Department of Education have historically not gone particularly well.

Perhaps more concerning to borrowers, however, is that FedLoan Servicing has been the primary servicer tasked with administering the Public Service Loan Forgiveness (PSLF) program. Under FedLoan’s management, the PSLF program has been plagued by dismal approval rates and widespread irregularities, leading to Congressional inquiries and lawsuits.

Borrowers on track for PSLF may be understandably concerned about what lies ahead. Here’s what you need to know.

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