Navigating student loan repayment has become quite the journey. Many borrowers have resumed payments after a prolonged pause, and various programs for loan forgiveness have been actively discussed. Notably, there have been opportunities to gain additional credit for repayment months through the one-time Income-Driven Repayment (IDR) adjustments and the Public Service Loan Forgiveness (PSLF) program waivers.
Even if these programs don't apply to you, you might still be receiving updates about your student loan account. Logging into your loan servicing portal might reveal discrepancies: a zeroed-out balance, a missing PSLF qualifying payment counter, or notifications about loan transfers.
Direct Loan borrowers are experiencing considerable confusion due to ongoing changes in student loan servicing. Some have seen loan forgiveness under the one-time IDR adjustment, while others are being informed about their loans transferring from MOHELA to another servicer or moving to MOHELA’s new platform.
If your Direct Loan is being transferred, expect to hear from the U.S. Department of Education (ED). For internal transfers, MOHELA will provide the necessary information for managing the transition to their new platform.
For borrowers seeking PSLF or those who are TEACH Grant recipients, pay close attention to recent announcements. There’s currently a pause on form processing for both the PSLF and TEACH Grant programs.
Many borrowers have questions about these changes. Let’s address some of the most common concerns.
Why are Direct Loans Being Transferred?
The student loan landscape is currently experiencing significant changes, particularly with the ED’s Next Generation (Next Gen) servicing initiative. This initiative aims to streamline the repayment process, making it easier for borrowers to manage their loans through their StudentAid.gov accounts. However, there will be a temporary processing pause on Public Service Loan Forgiveness (PSLF) and TEACH Grant documents during this phase of the Next Gen initiative.
Until now, borrowers seeking PSLF or holding a TEACH Grant have been serviced by MOHELA, the specialty servicer for these programs. The U.S. Department of Education had adopted a multiple servicer model, assigning specific programs, like PSLF, to designated servicers. MOHELA was the most recent servicer for PSLF and TEACH Grant participants. This model has been under strain in recent years, even before MOHELA took over the PSLF portfolio from FedLoan Servicing. You might have noticed media coverage about the “MOHELA Papers,” published by the Student Borrower Protection Center (SBPC) and the American Federation of Teachers (AFT).
Next Gen servicing will result in the U.S. Department of Education managing both the PSLF and TEACH Grant programs through StudentAid.gov. During this transition, there will be a pause on processing PSLF and TEACH Grant forms from May through July 2024.
To deliver the improved servicing experience promised by Next Gen, several changes need to take place. These changes will occur in phases and may impact borrowers in different ways.
What is Next Gen Servicing?
Since 2017, Next Gen servicing has been a key initiative at ED, aimed at enhancing communication for participants in federal student aid programs, including students, schools, borrowers, and ED partners. This initiative promises to modernize systems and processes, especially the methods by which Direct Loan borrowers repay their student loans. The overarching goal is to simplify the repayment process for Direct Loan borrowers and ensure a seamless, consistent experience.
What is the PSLF and TEACH Grant Pause?
MOHELA was the specialty servicer for both the PSLF and TEACH Grant program. Beginning on May 1, 2024, ED is pausing the processing of forms for the PSLF and TEACH Grant programs until July 2024.
For the PSLF program, this pause affects the processing of Employment Certification Forms (ECF) and PSLF applications. While you may still submit forms during this period, there will be a delay in processing until the end of June 2024. Any forms submitted will be processed in July 2024. ED recommends using the PSLF Tool on StudentAid.gov to submit your forms. If you submit a form during the pause, it is not recommended that you resubmit the form again in July—they even indicate that can create delays in processing of your information.
Participants in the TEACH Grant program have two options for submitting their certification forms: either mail the form and wait for processing to resume in the fall when the transition to StudentAid.gov is complete or wait until fall 2024 to submit their form directly through StudentAid.gov.
The purpose of this transfer process is to have the PSLF and TEACH programs managed directly by ED.
MOHELA is My Servicer, Am I Transferring to a New Servicer?
Not all MOHELA borrowers will be transferred to a new servicer. If your loans remain with MOHELA, they will transition to a new servicing platform, effectively an internal transfer.
If you are assigned a new student loan servicer, you will receive a notification detailing your new servicer and instructions on creating your account. For those staying with MOHELA but transitioning to the new platform, you will also be notified with guidance on what to expect and how to continue making payments. It's crucial to read all correspondence from MOHELA regarding this internal transfer.
The Next Gen initiative aims to streamline the process by using a single servicing platform for all Direct Loan borrowers. This Unified Servicing and Data Solution (USDS) will enable the Department of Education to evaluate the effectiveness of its student loan servicers better. Additionally, all Direct Loan borrowers will benefit from a familiar and easier-to-understand platform for managing their loans. The goal is for all borrowers to manage their student loan accounts through their StudentAid.gov account.
I’m Applying for PSLF, What’s Going to Happen to My Documentation Submissions During the Pause?
Any documentation submitted for PSLF, including the Employer Certification Form (ECF) or an application for discharge, will be paused until the end of June 2024. If you submit an ECF or PSLF discharge application now, it will not be processed until July.
If you believe you have made all qualifying payments, you have two options: request a loan forbearance pending forgiveness or continue making payments. If you choose to continue payments, you will receive a refund for any payments exceeding the 120 required qualifying payments.
The Department of Education has requested that you refrain from submitting duplicate ECF and PSLF application forms, as this will only cause future processing delays.
Who Is Managing PSLF After the Pause?
This is a great question because the process will be a bit different now. ED will be managing the PSLF program and your information regarding qualifying payments will be available on StudentAid.gov after the pause. You will no longer see qualifying payments towards PSLF on your servicer portal.
Your contact will become the Federal Student Aid Information Center (FSAIC) for questions regarding your PSLF progress. During the pause, from now until the end of June, you will not be able to see your PSLF progress. If you call FSAIC before your information is processed, they will be unable to answer questions regarding your progress and status.
As Direct Loan Borrowers, What Can We Expect in the Future?
This phase will primarily affect borrowers with MOHELA as their Direct Loan servicer, those pursuing Public Service Loan Forgiveness (PSLF), and recipients of TEACH Grants. Stay alert for notifications from your student loan servicer and the U.S. Department of Education’s Office of Federal Student Aid.
The Next Gen initiative should result in a better user experience. If you’re skeptical or concerned about the management of your student loan, you’re not alone. There has been a lot of attention on ED and student loan servicing and management. Only time will tell.