The Biden administration recently announced that a million borrowers with federal student loans will be transferred from MOHELA, the Education Department’s major contractor, to a new student loan servicer. This change will impact how borrowers make their monthly payments and will also affect those seeking loan forgiveness. This follows another major transition as the Education Department moves Public Service Loan Forgiveness servicing from MOHELA to StudentAid.gov. During this transition, borrowers have lost access to their PSLF data and will not receive loan forgiveness until the transfer is complete later this summer.
The student loan servicing transfer will impact 1 million borrowers, with MOHELA’s borrower accounts being transferred to other federal student loan servicers such as Aidvantage, Nelnet, or EdFinancial. MOHELA requested these transfers, and the Education Department agreed as part of its efforts to ensure borrowers receive the best service and support. These transfers do not change the ownership or terms of the loans, but borrowers will need to create a new online account with the new servicer and may need to re-establish payments. Communication will be sent to borrowers with instructions on the steps they need to take.
In addition to the servicing changes, the Education Department is also transitioning PSLF servicing from MOHELA to StudentAid.gov. During this transition, borrowers will lose access to their PSLF data, including details on qualifying payments, and no forgiveness applications will be processed. This transition is expected to be completed by July, at which point borrowers can regain access to their data and forgiveness applications will resume. Some borrowers may still keep MOHELA as their loan servicer while their PSLF data is transferred to StudentAid.gov, requiring them to continue making payments as required.
There may be more changes to student loan servicing in the future, with plans to transition the Total and Permanent Disability discharge program from Nelnet to StudentAid.gov later this fall. This program provides loan forgiveness to borrowers who are unable to work due to a health condition. Borrowers impacted by these changes will be contacted by their new servicer with more information and steps to ensure their payment and contact information is up to date. These ongoing changes aim to improve borrowers’ experiences and ensure they receive timely assistance and support.
Overall, the Education Department’s efforts to improve student loan servicing and forgiveness programs will have significant impacts on millions of borrowers. These changes will require borrowers to create new accounts, update their information, and potentially readjust their payment schedules. It is important for borrowers to stay informed of these changes and follow the instructions provided by the Education Department and their new loan servicer to avoid any disruptions in their repayment or forgiveness plans.
