Update for MOHELA student loan borrowers
Update about federal student loan servicing
The U.S. Department of Education, including its office of Federal Student Aid (FSA), is constantly working to improve the student loan borrower experience. FSA has worked tirelessly to give borrowers the information and support they need to take advantage of all of the benefits of the student loan repayment program. The Department rolled out the 12-month on-ramp period to give borrowers returning to repayment breathing room while they work student loan payments into their monthly budget. Until September 2024, borrowers will be protected from the harshest consequences of missed payments, such as delinquency and default.
The Department has taken action to provide a more affordable repayment experience through the Saving on a Valuable Education (SAVE) Plan, which will cut undergraduate payments in half beginning this summer and has made administrative fixes to income-driven repayment plans that have provided overdue forgiveness to more than 996,000 borrowers and brought many other borrowers closer to forgiveness. Last month, FSA began implementing the new loan servicing environment, a long-term solution designed to modernize loan servicing and improve the borrower experience while also strengthening security, accountability, and transparency.
As part of this ongoing work to improve borrowers’ experiences, this week FSA will begin transferring a portion of MOHELA’s borrower accounts to other federal student loan servicers. A different servicer will begin managing these loans and assisting these borrowers so that they can benefit timely from improvements that are being implemented this summer.
MOHELA requested these transfers and FSA, as part of its work to ensure borrowers receive the best service and support, agreed to this path. FSA has started working with MOHELA and other loan servicers to execute these transfers. Borrowers who will transition servicers will receive a communication from MOHELA and their new servicer with instructions for steps they need to take, which will include:
· Establishing an online account with their new servicer.
· Updating their address book or phone to include their new servicer’s contact information.
· Providing any changes in their contact information to their new servicer.
· Making any changes necessary to direct federal student loan payments to their new servicer, such as banking information or auto-payment settings.
For PSLF borrowers, this change is possible because PSLF borrowers will no longer be assigned to a single loan servicer, as was the case in the past. Starting this summer, borrowers will manage their participation in PSLF on StudentAid.gov, meaning that they can participate in the program regardless of their servicer.
As borrowers are transitioned over the next several months, they will be contacted by their new servicer with more information and to ensure all the necessary steps are taken for the borrower to have their payment and contact information up to date.
MOHELA continues to serve as one of the Department’s federal student loan servicers and will continue their support for millions of student loan borrowers. FSA will work closely with MOHELA and our other federal student loan servicers throughout the transition period to create a smooth process for borrowers.
The Department is committed to ensuring servicers deliver for borrowers. In addition to the above critical actions and supports to improve customer experience, the Department and FSA have taken steps to hold servicers accountable when they have not met their contractual requirements with the Department. We previously released our framework for monitoring servicers and protecting borrowers that has been utilized during the return to repayment and going forward. We conduct stringent monitoring of servicers and work with state and federal regulators in addition to leveraging borrower complaints. If servicers do not uphold their contractual requirements, we have the ability to withhold payments, suspending or re-allocate borrowers, and place servicers on a corrective action plan.
In the last six months, the Department has withheld payments from four loan servicers when each servicer sent late or no billing statements to millions of borrowers during the initial returning to repayment. The Department takes very seriously its responsibility to oversee servicers and ensure borrowers have a smooth and successful repayment experience. We will continue to monitor performance, communicate with servicers and borrowers, and take corrective action where needed. We are committed to a better student loan system that prioritizes borrower success and a repayment system that puts borrowers first.
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