PHEAA, a student-loan firm servicing 8.5 million debtors, is extending its contract by a yr.
It first introduced in July that it was ending its federal loan servicing this yr.
PHEAA has come underneath fireplace over accusations of deceptive debtors and mendacity to Congress.
In July, the Pennsylvania Higher Education Assistance Agency – a student-loan firm that handles 8.5 million borrower accounts – introduced it might be shutting down its federal loan companies in December.
But on Wednesday, the corporate reversed course, saying an settlement with the Education Department to increase its contract by one yr to permit extra time to transition debtors to new student-loan corporations.
A PHEAA spokesperson informed Insider in August that though the corporate was planning to finish its contract on December 14, it might proceed to work with Federal Student Aid to “ensure a smooth transition for all borrowers beyond that date – for as long as it takes under the Department’s direction.” On Wednesday, the corporate stated this extension would make sure that all loans have been efficiently transferred from PHEAA to different corporations earlier than the top of subsequent yr.
This extension would additionally enable extra time to account for the Education Department’s current overhaul of the Public Service Loan Forgiveness program, which forgives student debt for public servants after 10 years of qualifying funds. The new reforms embrace implementing a brief waiver to permit debtors to depend funds from any federal-loan applications or compensation plans towards loan forgiveness by means of PSLF, together with applications and plans that weren’t beforehand eligible.
Insider has beforehand reported on the numerous administrative hurdles with transitioning hundreds of thousands of debtors to new student-loan corporations earlier than the pandemic pause on funds lifts on February 1. Along with PHEAA, two different corporations – Granite State Management and Resources and Navient – introduced they’d even be ending their federal loan companies, affecting a mixed 16 million debtors.
But whereas PHEAA’s extension might enable extra time for debtors to transition, it would not wipe the corporate’s slate clear relating to its remedy of debtors. After the corporate first introduced its plans to finish federal servicing, Massachusetts Sen. Elizabeth Warren lauded the information. She stated in an announcement:
“Millions of loan borrowers can breathe a sigh of relief today knowing that their loans will no longer be managed by PHEAA, an organization that has robbed untold numbers of public servants of debt relief and was recently caught lying to Congress about its atrocious record of fines and penalties.”
Warren was referring to an April listening to by which she and John Kennedy, the rating member of the Senate Economic Policy Subcommittee, requested CEOs of all of the student-loan servicers within the nation to testify on the affect of student debt on debtors. James Steeley, PHEAA’s CEO, stated the corporate had by no means been penalized for its mismanagement of PSLF.
But weeks after the listening to, Warren and Kennedy despatched a letter to Steeley relating to “what appear to be false and misleading” statements and cited 9 Education Department critiques of their letter that instructed the corporate’s mismanagement of this system had resulted in corrective motion plans and two fines, every greater than $100,000.
Warren additionally not too long ago expressed concern that 16 million debtors could possibly be going through “millions of mistakes and problems” by the hands of recent student-loan corporations as soon as funds restart, and she or he requested extra info on how every of the businesses would guarantee “a smooth transfer of tens of millions of borrowers’ accounts to new student loan servicers.”
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