- Student loan company Granite State Management and Resources is not extending its loan service agreement after December.
- The Pennsylvania Higher Education Assistance Agency announced 2 weeks ago.
- Almost 10 million borrowers now have to be transferred to new service providers before the payment break is lifted.
- Check out Insider’s business page for more stories.
After the Pennsylvania Higher Education Assistance Agency (PHEAA) announced two weeks ago that it would not renew its federal student loan servicing contract, another student loan company followed suit on Monday, bringing the total number of borrowers required to switch service providers to nearly 10 Million.
Granite State Management and Resources (GSMR), a student loan not for profit with 1.3 million borrower accounts, announced to the Department of Education that after Dec. reported first. With the department planning to lift the student loan payment hiatus in October, it is now tasked with transferring these borrowers to a new service provider in addition to the 8.5 million borrowers previously under PHEAA.
“Federal Student Aid (FSA) and Granite State will work together to ensure student loan borrowers move smoothly to another loan service provider,” said Richard Cordray, director of the FSA, which is part of the Department of Education, in a statement received from Insider. “Our resolution plan will include early and frequent communication and clear guidelines on what borrowers can expect.”
Cordray added that the FSA will have strong oversight of the services to ensure that borrowers are “assisted and not harmed” during this transition.
GSMR was not immediately available for comment.
For the past decade, student loan service providers have been scrutinized by some legislators on Capitol Hill to ensure borrowers are protected. For example, after the PHEAA announcement two weeks ago, Massachusetts Senator Elizabeth Warren said that borrowers “can breathe a sigh of relief” knowing their loans are no longer administered by “an organization that has robbed countless debt relief officials “.
“The changes to the way student loans are serviced represent a unique opportunity to fix the system to serve borrowers rather than large businesses – including making future maintenance contracts with the Department of Education more accountable,” Warren said in one Statement on Insider. “I also urge strong oversight to ensure borrowers are protected during this transition.”
A PHEAA spokesman said in a statement at the time that since the company accepted the terms of its federal service contract, the loan programs “have become more complex and demanding, while the cost of maintaining these programs has risen dramatically”.
And GSMR also came under scrutiny. As of 2019, the Consumer Financial Protection Bureau (CFPB) – an agency that Warren led to protect consumers – 56 complaints by borrowers through the company, the main complaints being inaccurate credit reports, communication with the company, and attempts to recover unpaid claims.
Insider reported that service provider communications are a major problem for borrowers who could have paid their debts but couldn’t seek help from the company that billed them for their loans.
The Department of Education has not yet announced which companies will take over GSMR’s borrower accounts, and this development will likely serve as ammunition for Democrats’ calls to extend the student loan payment hiatus to allow more time to deal with these administrative troubles.
“Nobody is willing to resume student loan payments,” Warren said wrote on twitter. “No borrowers. Not the student loan companies. And certainly not our economy. We have to extend the payment break and #CancelStudentDebt. “