Education Ministry Extends Navient Student Loan Service Contract, FedLoan Not – What It Means For Borrowers


The Ministry of Education announced on Friday an extension of the student loan service contract for Navient

, one of the Department’s main loan managers. But a similar contract extension was not implemented for FedLoan Servicing. Here’s what that means for student loan borrowers.

Changes to the student loan service

Last month, Navient announced plans to end its student loan management contract with the US Department of Education. A few weeks earlier, FedLoan Servicing and Granite State Management & Resources – two other main loan managers for the department – had also announced their withdrawal.

Due to the cascade of student loan officer exits, the department is expected to transfer millions of borrowers who have federal student loans held by the department to a new services officer. Navient had come up with a deal with a company called Maximus, another loan management company that primarily handles the department’s delinquent federal student loans, to take over Navient’s accounts. This arrangement is expected to be approved by the Biden administration.

Loan service contract extension for Navient

Today, the ministry announced that it has extended Navient’s loan service contract until December 2023. As a result, Navient could continue to manage federal student loans held by the government for another two years, thereby reducing the risks of impending service transfers for student loan borrowers.

However, the ministry also indicated that it is still evaluating Navient’s proposal to transfer its portfolio of services from direct lending to Maximus. “Navient … has signed a contract extension, although the department is currently reviewing a request recently submitted by Navient to transfer its contract to Maximus,” the department wrote. Thus, notwithstanding the extension of the contract, it is possible that, if approved, Navient’s proposal could still come into force, albeit in a less rushed time.

No loan service contract extension for FedLoan service

FedLoan Servicing – the services wing of the Pennsylvania Higher Education Assistance Agency (PHEAA) Department of Education – did not get a two-year contract extension. FedLoan also recently announced its withdrawal from the ministry’s federal student loan management system, a particularly disruptive development given that FedLoan is the only provider hired to administer the troubled Public Service Loan Forgiveness Program (PSLF). Likewise, there is no contract extension for Granite State Management & Resources, another initially loan manager.

“The FSA is in the process of transferring these loans to the remaining agents,” the ministry wrote. Some FedLoan accounts are already being transferred to MOHELA, an existing departmental loan manager. However, the ministry did not confirm that all FedLoan accounts will be transferred to MOHELA, and many still remain with FedLoan for the time being.

Other student loan services

The Department accepted a two-year extension of service contracts for other major federal student loan services including Great Lakes Higher Education, HESC / Edfinancial, MOHELA, Nelnet

, and OSLA maintenance. This reduces the chances that there will be other abrupt withdrawals of loan services from the Ministry of Education service system in the short term.

The ministry also said contract extensions will include tighter oversight and consumer protections for borrowers, including “higher standards for performance, transparency and accountability.”

“The FSA is raising the bar for the level of service that student loan borrowers will receive,” said FSA chief operating officer Richard Cordray. “Our actions come at a critical juncture as we help borrowers prepare for the resumption of loan repayments early next year. The excellent work done by our negotiating team here allows us to ensure that loan services meet the highest standards or suffer the consequences. “

The Department has called these steps the initial phase of a larger process to transform and improve the federal student loan service for borrowers in the future.

Further reading

Student Loan Forgiveness Changes: Who Qualifies and How to Apply for Biden’s Relief Extension

Huge upheaval in student loan management: this important loan manager terminates his contract

Student Loan Management Transfers Begin This Week As Services Disruption Spreads: Key Details

Student loan borrowers: expect these 4 things by January


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