US President Joe Biden speaks about the economy during the Covid-19 pandemic in the State Dining … [+] Room of the White House in Washington, DC, July 19, 2021. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)
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Less than two weeks after a major student loan servicing shakeup, yet another U.S. Department of Education student loan servicer is calling it quits.
Granite State Management and Resources, which handles over a million student loan borrower accounts, announced that it will suspend its student loan servicing operations for the Department of Education by the end of the year.
“Yesterday, officials from Granite State Management and Resources notified leadership at the U.S. Department of Education office of Federal Student Aid that Granite State will leave the federal student loan servicing program by Dec. 31, 2021,” said Federal Student Aid Chief Operating Officer Richard Cordray in a statement. “FSA and Granite State will work together to ensure that student loan borrowers will transition smoothly to a different loan servicer.”
Granite State’s announcement comes on the heels of a similar decision by the Pennsylvania Higher Education Assistance Authority (PHEAA), whose federal Direct student loan servicing wing operates as FedLoan Servicing. PHEAA announced earlier this month that it would not be renewing its contract with the U.S. Department of Education. FedLoan Servicing handles over 8.5 million individual borrower accounts, and also is the primary servicer tasked with administering the Public Service Loan Forgiveness and TEACH Grant programs. FedLoan Servicing’s contract also ends in December.
The abrupt departure of two major student loan servicers from the Department of Education’s massive federal student loan system will likely be disruptive to millions of student loan borrowers. The Biden administration will now have to transfer 10 million or more student loan borrower accounts to other loan servicers. Such servicing transfers by Department of Education contractors have historically been chaotic, with widespread problems including lost records and missed payments.
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Complicating matters further is that the servicing transfers would have to occur in the midst of the expiration of the current moratorium on federal student loan payments. The CARES Act, legislation enacted by Congress last year in response to the pandemic and recession, temporarily suspended all payments and froze all interest on government-held federal student loans. The student loan payment pause was originally set to last six months, but was extended several times. The current extension of the moratorium ordered by President Biden will expire on September 30, 2021.
Advocates for student loan borrowers have been urging the Biden administration to extend the student loan payment moratorium into 2022, arguing that borrowers and student loan servicers are not prepared to handle the transition to regular repayment.
“Now more than ever, student loan borrowers need Joe Biden to deliver promised debt relief,” said Student Borrower Protection Center Executive Director Seth Frotman in a statement earlier this month. “Student loan borrowers… also need the White House to extend the pause on student loan payments while Secretary Cardona and the student loan industry come up with a plan to fix the broken student loan system.”
The Biden administration has suggested that the student loan payment pause could be further extended, depending on the state of the pandemic and the economy.
Student loan borrowers who are concerned about potential servicing disruptions should take steps now to protect themselves by downloading and retaining important documentation including payment histories and correspondence, reviewing their contact information, and monitoring their credit reports.