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On Heels of PHEAA Announcement, Student Loan Payment Pause Should be Extended

Friday, July 9, 2021
Whitney Barkley-Denney

WASHINGTON, D.C. – One of the largest student loan debt servicers, the Pennsylvania Higher Education Assistance Authority (PHEAA), announced Thursday that it would no longer service student loans when its contract with the federal government ends in December. PHEAA, which operates as FedLoan Servicing, services student loans for about 8.5 million borrowers, representing approximately 20 percent of all federal student loan borrowers.

Center for Responsible Lending (CRL) Senior Policy Counsel Whitney Barkley-Denney issued the following statement:

The student debt repayment system in America has long been broken. The announcement by PHEAA stands to amplify borrower confusion in an already chaotic time, even though they are far from the only student loan servicer that mistreats borrowers on a large scale.

The pandemic and its long-term financial and health implications are still very much impacting borrowers, especially borrowers of color, nationwide. Millions of students will now have to navigate a complicated and overwhelming system as their loans are transferred to a new servicer. This is yet another reason why the Department of Education must extend the student loan repayment pause past the looming September deadline and offer borrowers $50,000 in student debt cancellation.


  • PHEAA has been cited for mishandling payments and forgiveness programs for public service workers and has faced lawsuits for its handling of both the Public Service Loan Forgiveness program and federal TEACH grant program. PHEAA'S mismanagement of the student loans they are servicing has led to thousands of borrowers finding they were not eligible for the loan relief they have earned.
  • Financial regulators from all 50 states support stricter regulations for student loan debt servicers. While the Biden administration has already rescinded Trump-era policy that blocked state and federal regulators from accessing records, overseeing, and investigating student loan companies, more regulation needs to be implemented to rein in the historically problematic, abusive, and predatory practices of student loan servicers.
  • PHEAA’s decision to end its partnership with the Education Department follows the Utah Higher Education Assistance Authority’s departure from federal student loan servicing last year.


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