ICYMI: two of the largest student loan servicers are calling it quits.
FedLoan on July 8 announced that it won’t renew its student loan servicing contract with the US Department of Education (DoEd) this December. And yesterday, Granite State Resources and Management announced the same.
This is big news for two reasons. First, it leaves the servicers’ nearly 10 million borrowers — close to a quarter of all borrowers — in limbo as the DoEd develops a transition plan. And second, it further complicates the end of emergency federal student loan suspension, which is currently set to expire at the end of January.
What will happen next?
It’s unclear if the remaining federal loan servicers will have the capacity to take on FedLoan and Granite State’s borrowers — especially considering that servicers will already be tackling new challenges brought on by the end of the payment freeze.
In addition to capacity, the need for new processes could create friction. FedLoan is the sole provider for borrowers enrolled in the Public Service Loan Forgiveness program, so the servicer or servicers who absorb their portfolio face a learning curve.
While the shape of the transition has yet to take form, it’s certain to be a lengthy process — which is why many experts think this could be the final push needed for the Biden administration to further extend payment forbearance. FedLoan and Granite State’s departures add to a long list of potential catalysts for another extension, including hints from the Education Secretary, mounting pressure from Democratic lawmakers, and a report finding that 90 percent of borrowers aren’t ready to resume payment in February.
What does this mean for my student loans?
If your student loans are serviced through FedLoan or Granite State, don’t worry. The DoEd says they’re working with the servicers to plan the next steps, and you won’t need to take any action to transition your loans until either side says otherwise.
Regardless of your servicer, you’re probably keeping your fingers crossed for another payment suspension extension — and that’s OK. But until an official announcement is made, you should still plan to resume federal student loan repayment in February.
Preparing now is the best way to avoid getting stung by that first monthly bill. And if payment suspension is extended again, you’ll just have a head start on getting ready for the next expiration date.
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