Throughout the pandemic some interesting things have been happening in the world of student loans—some pandemic-related and others that just fell into this timing.  And if you have student loans, you really should know what is going on.

The Pause

In March 2020, when the pandemic started to hit hard in the U.S. and we learned all about lockdowns and quarantines, all federal student loans (including Direct Subsidized/Unsubsidized and Grad PLUS) were placed in a payment pause.  The idea was to make life easier for student loan borrowers while we all deal with this whole global pandemic thing.  For those in loan repayment, this made it so the required minimum payment on loans has been $0.  And the pause has had another benefit that has helped those currently in school as well as those in repayment:  during the pause the interest rates on all federal student loans have been set to 0%.  This means that no interest has been accruing on federal student loans for almost two years.  That adds up to thousands of dollars in savings for a typical law student.  The pause has been extended a couple of times as the pandemic has dragged on, and it is currently set to expire on May 1, 2022.  If there is not another extension, on May 1 loans will go back into repayment and their interest rates will reset to their original rates.  Brace yourself…it is coming.

The Loan Servicer Shuffle

When a student borrows a Federal Direct student loan, those loans are each assigned to a loan servicer contracted by the Department of Education (ED) to be in charge of managing that loan until it is repaid.  In the year 2021 three major loan servicers decided not to extend their contracts with ED and are exiting the Direct Loan servicing business.  Granite State Management and Resources is the smallest of these three.  Granite State loans will be transferred to EdFinancial, another experienced Direct Loan Servicer.  The other two servicers exiting the business are much larger and will impact a larger number of borrowers.  Navient (formerly a part of Sallie Mae) will be moving their loan portfolio to Aidvantage, which is a division of Maximus Education.  Maximus is experienced in Direct Loans as the collection agency that works on defaulted loans for ED.  Finally, FedLoan Servicing (a division of PHEAA), the servicer that handles all Public Service Loan Forgiveness loans (in addition to many others), will be transferring all of their Federal Direct Loans to MOHELA, yet another experienced Direct Loan servicer.  What this means is that if your loans are currently held by Granite State, Navient, or FedLoan Servicing, your loans are on the move.  If you have not already received notification that your loan has been transferred, that notification will be coming soon.  This does not change any of the terms of your loan.  It simply changes who you need to be in contact with regarding the loan.  Also, if you were on an income-driven payment plan and your loan has moved to a new servicer, you should contact that servicer to make sure your income-driven plan is set up in your loan’s new home.

The PSLF Limited Waiver

The Public Service Loan Forgiveness limited waiver doesn’t really impact currently enrolled students, but I know I have some alumni readers out there who can benefit.  Plus I find this whole issue pretty fascinating.  When the Public Service Loan Forgiveness (PSLF) program first began, there was a lot of chatter on Capitol Hill about how expensive the program would be, assuming that everyone who ever thought about working in public service was going to have tens of thousands of dollars in loans forgiven.  But when we finally (several years later) arrived at the point where borrowers were eligible to apply for forgiveness, almost nobody was approved.  Maybe they had the wrong kind of job.  Maybe they had the wrong kind of loan.  Maybe they were on the wrong payment plan.  There are multitude of reasons why a borrower can be denied PSLF, and this limited waiver allows a reprieve for some of those reasons.  The “wrong kind of loan” issue can be corrected retroactively with a Direct Loan Consolidation.  The wrong payment plan issue can be waived during this time.  The wrong kind of work issue, however, cannot be overlooked.  ED did a deep dive review of all the applications that were denied, and found that many of them could be approved under the terms of this waiver.  And as an extra added bonus, many borrowers who had made additional payments after they were technically eligible for forgiveness had those extra payments refunded to them.  It’s been a huge help to a lot of public servants.  But it is, indeed, temporary. This limited waiver expires on October 31, 2022.  So if you are in repayment and think you may benefit, it is important that you complete the PSLF Help Tool  before the end of October in order to make sure as many payments as possible count toward your 120 qualifying payments needed to earn forgiveness.

There’s been a lot happening behind the scenes in the world of student loans over the last two years.  I hope this helps to keep you in the know.  Questions can always be directed to your loan servicer.  Or to your friendly neighborhood law school financial aid director who always enjoys talking to students and alumni alike.