One of the federal government’s largest student loan servicers just called it quits, the New York Times reported. The Pennsylvania Higher Education Assistance Agency — which oversees the loans of 8.5 million student borrowers — said yesterday that it would not renew its contract with the federal government when it ends later this year. The agency, which is known to most borrowers as FedLoan, is one of several companies the Education Department pays to manage the government’s $1.59 trillion student loan portfolio. About 23 million borrowers aren’t making payments right now because of the temporary pause put in place because of the pandemic — and FedLoan’s announcement will only increase the pressure to extend the moratorium. The pause on payments and interest could expire in less than three months — as soon as Sept. 30. The millions of borrowers whose loans are overseen by FedLoan, including those in the Public Service Loan Forgiveness program, will have to be moved to a new servicer at the same time the machinery of payment processing is getting back up to speed. Turning the switch back on for tens of millions of borrowers was already going to be a monumental task, so consumer advocates and some legislators have been calling for the payment pause to be extended. They argue that the economic recovery has been uneven and that loan payments would have to resume just as other pieces of the pandemic safety net — including eviction moratoriums and enhanced unemployment benefits — are being dismantled. Democrats from both chambers of Congress wrote a letter to President Biden last month urging him to push payments off until at least March 31. The Education Department declined to comment on whether the situation would delay the resumption of payments. But advocates for student borrowers said it is crucial that the system have more time.
