FedLoan, a Federal Student Loan Handler, Won’t Renew Its Contract

The oft-maligned loan servicer’s decision could complicate matters for borrowers, who will soon have to start making payments again.

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FedLoan, a handler of millions of federal student loans, won’t renew its contract.

July 8, 2021, 2:03 p.m. ET

One of the federal government’s largest student loan servicers just called it quits.

The Pennsylvania Higher Education Assistance Agency, which is one of several companies paid by the Education Department to manage the government’s $1.59 trillion portfolio of student loans, said on Thursday that it would no longer serve in that role after its contract ends later this year.

The announcement comes less than three months before the federal government is expected to end the temporary pause on student loan payments and interest — on Sept. 30, at the earliest — which it put into place because of the pandemic. P.H.E.A.A., also known as FedLoan, services the accounts of 8.5 million borrowers, including those in the Public Service Loan Forgiveness program.

The contract for P.H.E.A.A., which has been frequently criticized for poor service, expires on Dec. 14. The agency said in a statement that it notified the Education Department on Thursday that it would “not accept an extension of its 12-year-old federal student loan servicing contract beyond what is needed to ensure a smooth transition for borrowers.”

P.H.E.A.A., a quasi-state agency, added that it planned to focus on its “core public service mission in Pennsylvania,” which includes helping students there pay for college. The agency said it entered the contract with the Education Department in 2009 to support that mission, but that the federal programs “have grown increasingly complex and challenging while the cost to service those programs increased dramatically.”

The agency’s original loan-servicing contract expired in June 2019, but it had continued working with the department through a series of extensions.

The decision was first reported by Penn Live.

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