Education Secretary Miguel Cardona announced that the next round of Public Service Loan Forgiveness debt cancellation benefits will be rolled out in the coming weeks, with more than 30,000 borrowers receiving automatic forgiveness. Additionally, federal student loan servicer PHEAA signed a one-year contract extension with the U.S. Department of Education. Here’s what to know about this week’s student loan trends.
2 current trends within student loans for the week of Nov. 15, 2021
1. More than 30,000 borrowers will receive student loan forgiveness in the next few weeks
Education Secretary Miguel Cardona announced in a series of tweets that veterans and service members are among the 30,000 student loan borrowers who are next in line to have their loan balances discharged through Public Service Loan Forgiveness (PSLF). This wave of forgiveness is part of the program’s recent overhaul, which temporarily alleviates the stringent eligibility requirements and has given many borrowers automatic progress toward the promised forgiveness.
Cardona’s Twitter statement claimed that the overhaul will forgive an estimated $2 billion. Roughly 10,000 have already had $175 million discharged, while 20,000 will “receive emails in the coming weeks.”
How this affects student loans
Cardona advised PSLF participants to keep an eye on their inboxes in coming weeks for more information about their PSLF status. Borrowers will be notified if their debt is going to be forgiven, so it’s a good idea to review your contact information on the Federal Student Aid website and regularly check your spam folder.
If you’re not already signed up for PSLF, the window to take advantage of these new eligibility requirements closes on Oct. 31, 2022. If you consolidate your loans and apply for the program before that date, you could receive automatic progress for payments you’ve made on previously ineligible loans.
2. PHEAA extends contract with the Education Department through December 2022
The Pennsylvania Higher Education Assistance Agency (PHEAA), also known as FedLoan Servicing, has signed a one-year contract extension with the Department of Education’s office of Federal Student Aid (FSA) ahead of its original expiration date on Dec. 14, 2021. The contract will now end in December 2022.
This extension comes at a turbulent time for federal servicers; federal student loan payments will resume after nearly two years in February 2022, and FedLoan Servicing was one of three federal servicers that announced intent to exit the federal lending space in 2021, causing a massive transfer of borrower accounts. To complicate matters further, FedLoan is the only company currently servicing PSLF, which underwent an overhaul in October.
A PHEAA news advisory says that the extension of FedLoan’s contract will ensure that the 8.5 million borrowers currently managed by the company will be transferred in an “orderly and timely” fashion.
How this affects student loans
This contract extension gives FedLoan much more breathing room as it transfers its borrowers to new servicers, particularly as it also works to implement the modified PSLF requirements. Borrowers will also benefit, since many will now avoid the complexity of having their loans transferred just before the federal forbearance period ends.
Over the next year, FedLoan borrowers will be transferred to MOHELA, Navient, Edfinancial or Nelnet. If your loans are currently managed by FedLoan, you will receive notifications from FedLoan, the Department of Education or your new servicer beforehand.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.