The Pennsylvania Higher Education Assistance Agency (PHEAA), which is best generally known as FedLoan — its arm that handles federal student money owed — has been contracted by the federal government to gather funds for the previous 12 years. It’s at the moment one among 4 primary servicers that the Department of Education makes use of, processing greater than $400 billion in student loans, or roughly 1 / 4 of the full federal student debt portfolio.
Since PHEAA began servicing federal loans in 2009, the compensation applications “have grown increasingly complex and challenging while the cost to service those programs increased dramatically,” the group mentioned in a press release.
The servicer has additionally been a goal of Massachusetts Democratic Sen. Elizabeth Warren, who mentioned in a press release Thursday that debtors “can breathe a sigh of relief today knowing that their loans will no longer be managed by PHEAA.”
At a congressional listening to in April, Warren accused PHEAA of under-counting funds. CEO James Steeley instructed lawmakers that that this was unfaithful.
What occurs subsequent?
PHEAA notified the Department of Education Thursday that it will not be renewing its contract after it expires on December 14. As of now, it is unclear what group or firm will deal with the loans subsequent.
Rich Cordray, chief working officer for Federal Student Aid throughout the Department of Education, mentioned in a press release that PHEAA agreed to work with the federal government to develop a “wind-down plan focused on ensuring borrowers transition smoothly to a different loan servicer.”
The company additionally agreed to proceed working with Federal Student Aid till all debtors have been transferred to a special loan servicer — even when that runs previous December 14, Cordray added.
CORRECTION: An earlier model of this story misstated the worth of student loans processed by PHEAA. It is $400 billion.