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About 2 Million People Soon to Receive New Student Loan Servicer

Nearly 2 million Americans who are borrowers of student loans will be receiving a new federal student loan servicer as soon as July. Many of these individuals are seeking debt relief from the Public Service Loan Forgiveness program. FedLoan, which is part of the Pennsylvania Higher Education Assistance Agency known as PHEAA, is the current servicer of these loans.

However, about a year ago PHEAA decided to end its contract with the federal government and starting last fall the federal loans serviced by FedLoan began being transferred in stages to other services. Around 2 million of these accounts still need to be transferred.

The loans of borrowers enrolled in the Public Service Loan Forgiveness program will begin being transferred to the Missouri Higher Education Loan Authority, MOHELA, in July. According to the Department of Education, the transfers will continue throughout the rest of the summer.

The Public Service Loan Forgiveness program cancels the debt of government and nonprofit workers after they have completed 10 years of qualifying payments. Previously, once a borrower requested to be enrolled in the program their loans were transferred to FedLoan.

However, FedLoan has received criticism from advocates for making errors and providing misinformation. A lawsuit settled by PHEAA in 2021 was brought by the Massachusetts Attorney General, Maura Healey, which alleged FedLoan violated state and federal consumer protection laws.

Borrowers should expect to receive several notices as their loans are being transferred. FedLoan is expected to send a notice 15 days before the transfer occurs, and then MOHELA will be sending a welcome notice once everything has been completed. The change will not impact any existing terms, conditions, interest rates, loan discharge, forgiveness programs or repayment plans because the loans are simply being transferred, not sold.

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