July 8., the Pennsylvania Higher Education Assistance Agency (often referred to as FedLoan) announced that it would not renew its contract with the federal government. FedLoan oversees the loans of 8.5 million student borrowers, which have been or will be transferred to another provider by the end of the year. FedLoan’s contract ends on December 14, but the agency told CNBC Make It that it will work with borrowers beyond that date if necessary to ensure a smooth transition.
Less than two weeks after FedLoan’s announcement, another student loan manager, Granite State Management & Resources, also announced that it would not extend its contract with the Department of Education when it expires on December 31. The manager manages approximately 1.3 million borrower accounts which will be transferred.
Navient, the country’s second-largest student loan manager, has also called on the education ministry to transfer the accounts of the 6 million borrowers it oversees to another manager called Maximus. Navient’s contract currently remains in effect until 2023, but the FSA is “currently reviewing” Navient’s claim.
âIn a perfect world, these transitions would be seamless for the borrower, but they might not be,â says Kevin Walker, editor of CollegeFinance.com. “And so borrowers should be careful.”
Using this information, Walker says that the first thing borrowers should check is if their account number has changed when transferring their loan “to make sure that through no fault of their own they don’t miss payments.” This way, borrowers can make sure that they are making their payments on the correct account.
The second thing he recommends is to verify that their payments are sent to the correct location of the new provider.
âEspecially if you are sending physical checks,â he says. “Most people probably don’t [send checks], but they can use bill payment with their bank account, which in some cases results in physical checks being sent. “ If a payment is sent to the wrong place, borrowers may not make the payments they think they are.
Third, it recommends that borrowers who use automatic debit payments ensure that payments are made accordingly after their loans are transferred.
Checking out these three details could help borrowers avoid the negative consequences that could arise if they miss payments after their loans are transferred, Walker says.
“You could incur charges, it could damage your credit, and interest could also build up in the principal,” he says. “In other words, your missed payments could be recapitalized into additional capital.”
Jason DiLorenzo, founder and CEO of PSLFJobs, a consultant for employers and a job platform, points out that borrowers who are interested in student loan cancellation based on income or the loan cancellation program of the Public Service (PSLF) should take stock of their progress.
âIf you’re looking for some form of federal loan cancellation, even if it’s taking a snapshot of your phone, do it,â he says. “You want to keep track of your student loan history.”
For those using an income-based repayment plan, DiLorenzo “would advise people to wait until your loan officer asks you to recertify your income. Because you are paying zero or paying on the basis of more income. old. And assuming people are making more money than in years past, you want that lag because then your payouts are lower. ”
Borrowers pursuing the PSLF must document the number of payments they have made for the 120 required monthly payments and complete proof of employment form, which confirms that a borrower’s workplace qualifies them for a utility loan discount, as soon as possible.
This is the best way for borrowers to ensure that their loans stay in the civil service loan cancellation program when they are transferred, says DiLorenzo.
âIf you have progressed to the PSLF, now submit another employment certification form,â he explains, noting that this step is especially important for borrowers who hope to take advantage of the limited-time PSLF exemption offered by the PSLF. Department of Education until Oct. 2022. âYou will submit this employment certification form after consolidation, and they will tell you how many qualifying payments you have made. But you have to consolidate the loans over the next year or the previous payments made on them don’t count. “
DiLorenzo admits it can be “overwhelming” when loans are transferred from one provider to another, but by making sure they track their progress toward forgiveness, borrowers can give themselves the best chance of a transition. slowly.