Another student loan company shuts down in December
- Granite State Management and Resources does not renew its loan service contract after December.
- The Pennsylvania Higher Education Assistance Agency announced the same thing two weeks ago.
- Nearly 10 million borrowers will need to be moved to new services before the payment break is lifted.
After the Pennsylvania Higher Education Assistance Agency (PHEAA) announced two weeks ago that it would not extend its federal contract for the service of student loans, another student loan company followed suit on Monday, bringing the total number of borrowers between the two who will have to change service agents to nearly 10 million.
Granite State Management and Resources (GSMR), a nonprofit student loan company that has 1.3 million borrower accounts, has informed the Department of Education that it will not seek renewal of its federal contract for student loan service after December 31 Politico first reported. As the ministry plans to lift the hiatus on student loan payments in October, those borrowers will need to be transferred to a new department, in addition to the 8.5 million borrowers who were previously with PHEAA.
“The FSA (Federal Student Aid) and Granite State will work together to ensure that student loan borrowers will move smoothly to another loan service,” said Richard Cordray, director of FSA, part of the Department of Education, in a press release obtained. by Insider. “Our liquidation plan will include early and frequent communications and clear advice on what borrowers should expect.”
Cordray added that the FSA would closely monitor the services to ensure borrowers are “supported and not harmed during this transition.”
GSMR could not immediately be reached for comment.
Over the past decade, student loan services have come under close scrutiny by some Capitol Hill lawmakers who want to make sure borrowers are protected. For example, after the PHEAA announcement two weeks ago, Senator Elizabeth Warren of Massachusetts said borrowers could “breathe a sigh of relief” knowing that their loans would no longer be managed by “an organization that has deprived countless debt relief officials ”. “
“The changes in the student loan department present a golden opportunity to fix the system so that it serves borrowers rather than large corporations – which includes better accountability in future service contracts with the Department of Education. “Warren told Insider in a statement. “I am also pushing for strict monitoring to ensure borrowers are protected during this transition.”
A spokesperson for PHEAA said in a statement at the time that since the company accepted the terms of its federal service contract, loan programs had become “increasingly complex and difficult as the cost service of these programs increased dramatically “.
And GSMR has also come under scrutiny. Since 2019, the Consumer Financial Protection Bureau – an agency run by Warren to protect consumers – has received 56 complaints from borrowers about the company, with the top complaints about inaccurate credit reports, miscommunication and attempts to recovery of unpaid debts.
Insider previously reported that service communication was a big issue with borrowers who could have paid off their debt but couldn’t seek help from the company that charged them for their loans.
The Education Department has yet to announce which companies will take over the accounts of CMSM borrowers, and this move will likely serve as support for Democrats’ calls to extend the hiatus on student loan payments to allow more time to deal with these administrative difficulties.
“No one is ready for the resumption of student loan payments,” Warren wrote on Twitter. “Not the borrowers. Not the student loan companies. And certainly not our economy. We need to extend the pause on payments and #CancelStudentDebt. “