Here’s what your new student loan manager means for student loan forgiveness.
Here’s what you need to know – and what it means for your student loans.
Millions of student loan borrowers may soon have a new student loan servicer — the company that manages your student loan payments and acts as a customer service for your student loans. For example, approximately 2 million student loan borrowers seeking government loan forgiveness will have a new student loan manager starting this month. If you are enrolled in government loan forgiveness, FedLoan Servicing will no longer service your state student loans. Instead, meet MOHELA who will be your new student loan service provider. You may have a lot of questions about this significant change. So let’s dive in and answer your questions.
Who is MOHELA?
MOHELA is the Missouri Higher Education Loan Authority and a major student loan servicer.
When will MOHELA become my student loan servicer?
If you have federal student loans and are seeking government loan forgiveness, MOHELA will be your new student loan servicer in July 2022. The US Department of Education will transfer student loans from FedLoan Servicing to MOHELA effective July 1, 2022. Aid will notify you in writing before your student loan is transferred. Until notified, you should continue to make student loan payments to FedLoan Servicing. After the transfer, you pay the student loan directly to MOHELA. If you’re using automatic payment, update your bank information to reflect the change in student loan provider.
Why is MOHELA my new student loan service provider?
FedLoan Servicing terminated its federal student loan servicing contract for the Public Service Loan Forgiveness program with the US Department of Education. The US Department of Education has appointed MOHELA as the new student loan service provider for the Public Service Loan Forgiveness program.
What action do I need to take now?
You don’t have to do anything about your new student loan service provider. The US Department of Education automatically transfers your government student loans from FedLoan Servicing to MOHELA.
Will the interest rate on my student loan rate change?
Transferring your state student loans from PenFed to MOHELA does not change the interest rate on your student loans. Why? Federal student loans have fixed interest rates, which means that you have the same interest rate throughout the life of your student loan. Currently, federal student loan payments are suspended until August 31, 2022. Your regular interest rate before the student loan payment pause applies when student loan payments resume. What if you borrow new federal student loans? Your interest rate will be higher if you take out a new federal student loan. Why? The Federal Reserve has hiked interest rates several times this year, so expect higher rates on student loans starting July 1. The good news, however, is that Biden has proposed cutting student loan rates.
Will the limited student loan forgiveness waiver be extended?
The limited student loan forgiveness waiver offers student loan borrowers a unique opportunity to receive student loan forgiveness more quickly. The Biden administration allows previous student loan payments that were previously ineligible to “count” toward the 120 monthly student loan payments required for student loan forgiveness. Examples include partial or late student loan payments, or all student loan payments made before the student loan consolidation. The limited student loan forgiveness waiver expires on October 31, 2022. However, Biden has proposed making the limited waiver on student loan forgiveness permanent.
What’s new in the termination of the student loan?
Biden is considering enacting a large-scale student loan freeze. In recent weeks, Biden has forfeited $6 billion in student loans to 200,000 student loan borrowers. The President has also announced major changes to student loan forgiveness. However, Biden has not commented publicly on a large-scale student loan forgiveness recently, though he plans to announce a decision within weeks. Student-loan borrowers are hoping to avoid a student-loan nightmare scenario even as progressive members of Congress still urge Biden to call $50,000 in student loans.
Student loans: next steps
Student loan repayments will resume for state student loans beginning September 1, 2022. This is especially important for student loan forgiveness, as each payment you make can bring you closer to your way out of student loan debt. If you’re planning to resume student loan payments, here are some helpful ways to save money on your student loans: