FedLoan — an arm of the Pennsylvania Higher Education Assistance Agency known as PHEAA — is currently servicing those loans.
In recent years, FedLoan was tasked with handling the loans for every borrower seeking debt relief from the Public Service Loan Forgiveness program, which cancels the debt of government and nonprofit workers after making 10 years of qualifying payments. Once a borrower indicated they want to enroll in the program, their loans were transferred to FedLoan.
What borrowers can expect
Public Service Loan Forgiveness borrowers can expect to receive several notices as their loans are transferred.
A notice from FedLoan is expected to be sent at least 15 days before the transfer occurs, followed by a welcome notice from MOHELA once the transfer is complete.
The loans are being transferred, not sold. That means the change will not impact the existing terms, conditions, interest rates, loan discharge or forgiveness programs, or available repayment plans on the loans. The repayment plan a borrower is enrolled in does not change once transferred unless the borrower opts to make a change.
Borrowers are not required to do anything during the transfer process.
FedLoan also services some non-PSLF borrowers. The vast majority of those accounts have already been transferred from FedLoan to other loan servicers, including Aidvantage, EdFinancial or Nelnet.
How to qualify for the PSLF waiver
To take advantage of the temporary PSLF waiver, some borrowers may need to take action by October 31.
For those who are currently serviced by FedLoan and are enrolled in the PSLF program, no action is required. Their loans will automatically be transferred to MOHELA over the summer.
The Department of Education continues to review PSLF borrowers’ past payments to count those who are newly eligible for the forgiveness program. Due to the temporary waiver, it no longer matters what kind of federal student loan a borrower had or what payment plan he or she was enrolled in. All payments will be eligible for the PSLF program if the borrower was working full time for a qualifying employer.
More changes could be coming for federal student loan borrowers
The transfer of federal student loans from FedLoan to MOHELA this summer comes as borrowers await to hear whether President Joe Biden decides to extend the pandemic-related pause on payments, as well as if he will act to broadly cancel student loan debt.
Biden has already extended the pause several times and is facing political pressure to delay the restart date again, which is currently set two months before the midterm elections.
On the campaign trail, he said he would support $10,000 in forgiveness. White House officials have indicated that he is also looking at setting an income threshold so that high-earning borrowers would be excluded from the debt relief.