Student loans: 9 million borrowers benefit from a new service. here’s why
The Pennsylvania Higher Education Assistance Agency (PHEAA), better known as FedLoan – its branch that handles federal student debt – has been hired by the government to collect payments for the past 12 years. It is currently one of the four main services used by the Department of Education, processing over $ 400 billion in student loans, or about a quarter of the total federal student debt portfolio.
Since the PHEAA began managing federal loans in 2009, repayment programs “have become increasingly complex and difficult as the cost of servicing these programs has increased dramatically,” the organization said in a statement. .
The server has also been the target of Massachusetts Democratic Senator Elizabeth Warren, who said in a statement Thursday that borrowers “can breathe a sigh of relief today knowing that their loans will no longer be managed by the PHEAA.”
At a congressional hearing in April, Warren accused the PHEAA of under-counting payments. CEO James Steeley told lawmakers this was wrong.
What happens next?
The PHEAA informed the Education Ministry on Thursday that it would not renew his contract after it expired on December 14. At this time, it is not known which organization or company will handle the loans next.
Rich Cordray, director of operations for Federal Student Aid in the Department of Education, said in a statement that PHEAA has agreed to work with the government to develop a “liquidation plan to ensure a smooth transition for borrowers to another loan service “.
The agency has also agreed to continue working with Federal Student Aid until all borrowers have transferred to another lending agency – even if that is beyond Dec. 14, Cordray added.
CORRECTION: An earlier version of this story misjudged the value of student loans processed by the PHEAA. It’s $ 400 billion.