Navient will stop servicing federal student loans, and other current student loan news for the week of Oct. 4, 2021

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The Biden administration is launching hearings to potentially reform federal student loan forgiveness and repayment programs, while an expert close to the administration claims that significant revisions to PSLF are underway and could be announced as early as this week. Additionally, federal servicer Navient announced plans to exit its contact with the U.S. Department of Education.

Here’s what you need to know about this week’s top trends and how they could impact your student loans.

3 current trends within student loans for the week of Oct. 4, 2021

1. Navient to exit federal student loan servicing

Late last week, Navient announced plans to end its contract with the Department of Education. If the departure is approved, 6 million student loan borrowers will see their loans transferred to Maximus, one of the five student loan servicers the department will contract with in its new Next Gen platform.

Navient has been the subject of several lawsuits in recent years, and its contract was not up for renewal when the Department of Education slims down the number of federal student loan servicers. Borrowers have complained about mismanaged accounts and incorrectly processed payments.

Navient first needs approval from the Office of Federal Student Aid (FSA) to officially stop federal servicing, but that assessment is currently underway.

How this affects student loans

Navient is one of the nation’s largest federal student loan servicers and is the third servicer in 2021 to announce its intent to stop managing federal student loan products. The Pennsylvania Higher Education Assistance Agency (PHEAA) and Granite State Management and Resources are also ending their contracts early.

If you have a student loan managed by Navient, you will be notified of the steps you need to take to prepare. Your loans themselves will not change, but they will be managed by a new company once the transition is complete — so the process of making payments or getting help could look a little different. To ease the transition, check your account details now to make sure that all of your contact information is up to date.

Key takeaway
Borrowers with student loans managed by Navient may have their loans transferred to a new servicer soon.

2. Education Department begins hearings on federal forgiveness and repayment programs

Last week, the U.S. Department of Education announced an agenda for the first of several hearings on the topic of federal student loan repayment plans. Hearings begin this week and could lead to significant changes for forgiveness programs like total and permanent disability (TPD) discharge, Public Service Loan Forgiveness (PSLF), closed school discharge, borrower defense to repayment and income-driven repayment plans.

The department’s proposals for each of the programs include significant changes to the application process and qualification requirements, in all cases making the programs easier to pursue.

These changes are part of the negotiated rulemaking process, which is conducted by a committee of stakeholders like college administrators, lenders and borrowers. Following a series of hearings, the committee will evaluate any potential new regulations to implement.

How this affects student loans

The potential student loan reforms will be discussed, debated and reformed over several months. After this week, hearings will take place Nov. 1 through Nov. 5 and Dec. 6 through Dec. 10. If changes are approved, it may still be some time before they’re implemented.

However, if these changes do happen, federal student loan borrowers would have a clearer path toward loan forgiveness. The revisions would introduce automation to many of the existing programs, cutting back on application and paperwork requirements. Borrowers could also see more flexibility in qualification requirements for programs like PSLF and TPD discharge.

Key takeaway
The Department of Education is considering revisions to multiple student loan forgiveness and repayment programs.

3. Changes to PSLF could come this week, experts say

NPR has reported that an expert familiar with the administration’s plans expects the Department of Education to roll out significant revisions to PSLF as early as this week. The potential reform could come in two stages: short-term action using executive authority to retroactively give qualified borrowers credit toward the program and long-term overhauls to make the program easier to qualify for.

Long-term changes will be discussed during the rulemaking process — and PSLF is already on the agenda for hearings that begin today. However, if NPR’s source is correct, the short-term changes could be announced as early as this week as well.

How this affects student loans

PSLF has been under scrutiny in recent years because of its stringent eligibility and application requirements, with only 2 percent of applicants successfully navigating the program and being approved. The Department of Education began the process of reevaluating the program earlier this year, but using executive authority could fast-track some temporary changes.

According to NPR, changes could include:

  1. Retroactive credit for payments made in the wrong repayment plan or on the wrong loan type.
  2. Relaxed requirements around payments, allowing late payments and some paused payments to count toward the program requirements.
  3. Broader definition of public service work.
Key takeaway
Major reforms to the PSLF program could be rolled out by the Biden administration this week.

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.

Learn more:

Written by
Hanneh Bareham
Student loans reporter
Hanneh Bareham specializes in everything related to student loans and helping you finance your next educational endeavor. She aims to help others reach their collegiate and financial goals through making student loans easier to understand.
Edited by
Student loans editor