The Biden administration announced this week that a million borrowers with federal student loans will soon be transferred from MOHELA, one of the Education Department’s major contractors. Impacted borrowers will soon have a new student loan servicer. This will change how — and to whom — borrowers make their monthly payments.
This servicing change comes on the heels of another major transition as the Education Department moves Public Service Loan Forgiveness servicing from MOHELA to StudentAid.gov. During the transitionary period, borrowers have now lost access to their PSLF data, and will not receive student loan forgiveness until the transfer is complete later this summer.
Ultimately, these student loan servicing changes will have major impacts for millions of borrowers seeking loan forgiveness or just making their payments. Here’s a breakdown.
Student Loan Servicing Transfer Will Impact 1 Million Borrowers
This week, the Education Department’s Office of Federal Student Aid announced that many borrowers whose federal student loans are currently serviced by MOHELA will be transferred to other contracted loan servicers.
“As part of this ongoing work to improve borrowers’ experiences, this week FSA will begin transferring a portion of MOHELA’s borrower accounts to other federal student loan servicers,” said the department in a new blog post. “A different servicer will begin managing these loans and assisting these borrowers so that they can benefit timely from improvements that are being implemented this summer.” Borrowers impacted by the transfer will end up with one of the department’s other servicers such as Aidvantage, Nelnet, or EdFinancial.
“MOHELA requested these transfers,” said the department. “FSA, as part of its work to ensure borrowers receive the best service and support, agreed to this path. FSA has started working with MOHELA and other loan servicers to execute these transfers.”
Borrowers should be notified of any loan servicing change. Importantly, loan servicing transfers within the Education Department’s federal student aid system do not change ownership of the loans, the underlying terms and conditions, or eligibility for federal repayment and student loan forgiveness programs. The loans will remain federally-managed student loans, with access to all of the same programs. However, borrowers will need to create a new online account with the new servicer once the transfer is complete. And they may need to re-establish payments.
“Borrowers who will transition servicers will receive a communication from MOHELA and their new servicer with instructions for steps they need to take,” said the department. This includes creating a new online account, updating contact information, and entering in banking details or changing automatic payment settings.
PSLF Servicing Changes Will Pause Student Loan Forgiveness
Meanwhile, the Education Department began a long-planned servicing transition for the PSLF program this week. The department is moving PSLF servicing from MOHELA to the StudentAid.gov platform. During this transition — which began on May 1 — borrowers will lose all access to their PSLF data, including details on qualifying PSLF payments. No PSLF employment certification forms will be processed, and borrowers will not receive any student loan forgiveness under the PSLF program.
The transition is expected to wrap up this July. At that point, borrowers should be able to regain access to their PSLF data through a new dashboard at StudentAid.gov. The Education Department will also resume processing student loan forgiveness applications.
Importantly, while the PSLF functions of borrowers’ MOHELA accounts will be transferred over to StudentAid.gov, some borrowers will still keep MOHELA as their loan servicer. That means that those borrowers must continue to make payments on their student loans to MOHELA as required, even while their PSLF data is transferred to StudentAid.gov.
However, there are some borrowers who may be impacted by both the PSLF transition and the MOHELA servicing transfer. These borrowers will experience both a servicing transfer to a new loan servicer (Aidvantage, EdFinancial, or Nelnet) and will also see their student loan forgiveness data for the PSLF program transitioned to StudentAid.gov.
Other Student Loan Forgiveness And Servicing Changes On The Horizon
The Education Department may be implementing additional changes to student loan servicing in the coming months. This may impact other student loan forgiveness and repayment programs, and many more borrowers.
The Total and Permanent Disability discharge program, which can provide loan forgiveness to borrowers who are unable to maintain gainful employment due to a health condition, is currently administered by Nelnet. However, the department anticipates transitioning TPD discharge servicing from Nelnet to StudentAid.gov later this fall via a similar process as the PSLF transition.
“As borrowers are transitioned over the next several months, they will be contacted by their new servicer with more information and to ensure all the necessary steps are taken for the borrower to have their payment and contact information up to date,” said the department.
Read the full article here
