FedLoan borrowers will soon see their service switch to MOHELA. Here’s what you need to know


FedLoan — a branch of the Pennsylvania Higher Education Assistance Agency known as PHEAA — currently administers these loans.

But a year ago, PHEAA decided to terminate its contract with the federal government. Since last fall, federal loans managed by FedLoan have been transferred in stages to several other managers. Around 2 million accounts still need to be transferred.
In July, loans held by borrowers enrolled in the Civil Service Loan Forgiveness Program will begin transferring to the Missouri Higher Education Loan Authority, known as MOHELA. These transfers will continue throughout the summer, according to the Ministry of Education.

For the past several years, FedLoan has been responsible for servicing the loans of every borrower seeking debt relief under the Public Service Loan Forgiveness Program, which forgives government employees and nonprofit organizations’ debt. lucrative after making 10 years of qualifying payments. Once a borrower indicated they wanted to enroll in the program, their loans were transferred to FedLoan.

But FedLoan has drawn criticism from borrower advocates for making mistakes and providing incorrect information to borrowers about qualifications. In 2021, PHEAA settled a lawsuit brought by Massachusetts Attorney General Maura Healey alleging the loan servicer violated federal and state consumer protection laws. PHEAA has agreed to provide individual audits to all of the 200,000 Massachusetts borrowers it serves.
Last year, the Biden administration temporarily expanded eligibility for the Civil Service Loan Forgiveness Program to include borrowers who have older loans that weren’t originally eligible as well as those who were in the wrong repayment plan but met the other conditions. By the end of May, the Ministry of Education had approved forgiveness for nearly 145,000 borrowers under this waiver.

What borrowers can expect

Public service loan forgiveness borrowers can expect to receive multiple notices as their loans are transferred.

A notice from FedLoan should be sent at least 15 days before the transfer, followed by a welcome notice from MOHELA once the transfer is complete.

Full borrower account details must be available from MOHELA no later than 10 business days after the loan transfer date included in the transfer notification sent by FedLoan, according to the MOHELA website.

Loans are transferred, not sold. This means that the change will not affect the terms, conditions, interest rates, loan release or cancellation programs or repayment plans available on the loans. The repayment plan a borrower is enrolled in does not change once transferred, unless the borrower chooses to make a change.

Borrowers are not required to do anything during the transfer process.

FedLoan also serves some non-PSLF borrowers. The vast majority of these accounts have already been transferred from FedLoan to other loan servicers, including Aidvantage, EdFinancial or Nelnet.

Two other loan servicers also terminated their contract with the Ministry of Education last year. Loans managed by Navient were transferred to Aidvantage and loans managed by Granite State were transferred to Edfinancial Services. These transfers were completed at the end of 2021.
The Department of Education posts updates on PSLF processing and loan transfers on its Studentaid.gov website.

How to Qualify for the PSLF Waiver

To take advantage of the PSLF temporary relief, some borrowers may need to take action before October 31.

Borrowers who previously had an ineligible loan, such as the Federal Family Education Loan, must consolidate their debt into a Federal Direct Loan and then submit a PSLF form to show eligible employment by the October deadline. Once the consolidation is complete, the new loan will be transferred to MOHELA.

For those currently served by FedLoan and enrolled in the PSLF program, no action is required. Their loans will be automatically transferred to MOHELA during the summer.

The Department of Education continues to review past payments from PSLF borrowers to count those who are newly eligible for the rebate program. Because of the temporary waiver, it doesn’t matter what type of federal student loan a borrower had or what payment plan they were enrolled in. All payments will be PSLF eligible if the borrower was working full-time for an eligible employer. .

More changes may be coming for federal student loan borrowers

The transfer of federal student loans from FedLoan to MOHELA this summer comes as borrowers wait to hear whether President Joe Biden decides to extend the pandemic-related payment pause, as well as whether he will act to largely forgive loan debt. student.

Payments are expected to resume on federal student loans after August 31 after being suspended since March 2020. Balances for federal student loan borrowers were effectively frozen during this time. Interest has ceased to accrue and overdue debt collections have been suspended.

Biden has already extended the hiatus several times and faces political pressure to again delay the restart date, which is currently set for two months before the midterm elections.

The president also faces pressure to forgive some student loan debt for each borrower. In April, Biden said he was considering a large student loan forgiveness.

During the election campaign, he said he would support $10,000 in pardons. White House officials have said he is also considering setting an income threshold so that high-income borrowers are excluded from debt relief.


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