Here’s what your new student loan servicer means for student loan forgiveness.
Here’s what you need to know — and what it means for your student loans.
Student Loans
Millions of student loan borrowers could soon have a new student loan servicer — the company that manages your student loan payments and functions as customer service for your student loans. For example, approximately 2 million student loan borrowers pursuing public service loan forgiveness will get a new student loan servicer starting this month. If you’re enrolled in public service loan forgiveness, FedLoan Servicing will no longer service your federal student loans. Instead, meet MOHELA, who will be your new student loan servicer. You may have a ton of questions regarding this significant change. So, let’s dive in and get your questions answered.
Who is MOHELA?
MOHELA is the Missouri Higher Education Loan Authority and is a major student loan servicer.
When will MOHELA become my student loan servicer?
If you have federal student loans and are pursuing public service loan forgiveness, then MOHELA will become your new student loan servicer in July 2022. The U.S. Department of Education will transfer student loans from FedLoan Servicing to MOHELA beginning on July 1, 2022. Federal Student Aid will notify you in writing before your student loans are transferred. Until you are notified, you should continue to make student loan payments to FedLoan Servicing. Following the transfer, you will make student loan payments to MOHELA directly. If you use auto-pay, update your banking information to reflect the change of student loan servicer.
Why is MOHELA my new student loan servicer?
FedLoan Servicing ended its student loan servicing contract for federal student loans for the Public Service Loan Forgiveness program with the U.S. Department of Education. The U.S. Department of Education named MOHELA as the new student loan servicer for the Public Service Loan Forgiveness program.
What action do I need to take now?
You don’t need to take any action regarding your new student loan servicer. The U.S. Department of Education will automatically transfer your federal student loans from FedLoan Servicing to MOHELA.
Will the interest rate on my student loans rate change?
The transfer of your federal student loans from PenFed to MOHELA will not change the interest rate on your student loans. Why? Federal student loans have fixed interest rates, which means you will have the same interest rate over the life of your student loan. Currently, federal student loan payments are paused through August 31, 2022. Your regular interest rate from before the student loan payment pause will apply when student loan payments restart. What if you borrow new federal student loans? Your interest rate will be higher if you borrow a new federal student loan. Why? The Federal Reserve has raised interest rates several times this year, so you should expect higher student loan interest rates beginning on July 1. That said, the good news is that Biden has proposed to lower the interest on student loans.
Will the limited waiver on student loan forgiveness be extended?
The limited waiver for student loan forgiveness offers student loan borrowers a one-time opportunity to get student loan forgiveness faster. The Biden administration is allowing past student loan payments previously ineligible to “count” toward the 120 monthly student loan payments required for student loan forgiveness. For example, this includes partial or late student loan payments or any student loan payments made before student loan consolidation. The limited waiver for student loan forgiveness expires on October 31, 2022. That said, Biden has proposed to make the limited waiver for student loan forgiveness permanent.
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What is the latest with student loan cancellation?
Biden is considering whether to enact wide-scale student loan cancellation. In recent weeks, Biden has canceled $6 billion of student loans for 200,000 student loan borrowers. The president also has announced major changes to student loan forgiveness. That said, Biden hasn’t commented publicly on wide-scale student loan forgiveness recently, although he plans to announce a decision within weeks. Student loan borrowers are hoping to avoid a nightmare scenario on student loans, even as progressive members of Congress are still lobbying Biden to cancel $50,000 of student loans.
Student loans: next steps
Student loan repayment will restart for federal student loans beginning on September 1, 2022. This is especially important for student loan forgiveness, since every payment you make can get you closer to getting out of student loan debt. As you plan for the restart of student loan payments, here are some helpful ways to save money on your student loans:
- Student loan refinancing (lower interest rate + lower payment)
- Income-driven repayment (lower payment)
- Student loan forgiveness (federal student loans)