The Department of Education outsources the billing work of borrowers and guides them through the repayment process to hired providers. FedLoan, which has a contract to manage the accounts of borrowers pursuing a utility loan forgiveness, told the agency this summer it would not renew its contract when it expires at the end of the year. He said the “increasingly complex and difficult” job of servicing federal loans had become too costly.
Another major service provider, Navient, said last month it was also stepping down to focus on its other lines of business. These defections and those of several small servers mean that the Education Department will have to move at least 16 million accounts to new servers over the next few months – a process that has in the past been filled with confusion and errors. Agency officials said they do not yet have a successor to FedLoan.
Kristi Jacobson, a second-grade teacher at George R. Moscone Elementary School in San Francisco, was cautiously optimistic about the prospects for relief.
Ms Jacobson learned in June that none of the payments she had made on her loans since 2005 were forgivable. She had also been submitting the annual program documents since 2014. She found this out by filling out a form on the Department of Education website that advised her to consolidate her loans into a loan eligible for public service loan forgiveness. . The news stunned her.
“I have goose bumps,” she said. “I read it over and over again.”
The 54-year-old was anxious to retire in nine years. Instead, she would restart the clock on another 10 years of payments on her $ 86,000 loan, at $ 550 per month, after consolidating her federal family education loans into a qualifying loan this summer.
“I don’t think I should get a free ride,” Ms. Jacobson said. “I borrowed this money for my studies and I should pay it back. But being 54 and thinking, Oh, I’ll never buy a house. It’s like being in a Kafkaesque tunnel.
“I’ve been told good things are on the way,” she added, “but I can’t believe it until this happens.”