Pennsylvania’s Student Financial Aid Agency plans to end its role as the state student loan administrator when its current contract with the US Department of Education expires later this year, resulting in several hundred downsizing.
Agency officials said they currently have no say how many of its 2,250 employees will be affected. You intend to work with those affected to find other employment.
That news was brought to staff Thursday morning after the President and CEO of the Pennsylvania Higher Education Assistance Agency, James Steeley, told federal officials that it will not apply for another renewal of the 2019 expired 10-year student loan contract that will be used during The period has been extended several times over the past two years. The contract now expires on December 14th.
With this decision, PHEAA officials are assuring that the 58-year-old quasi-government agency will remain in solid financial shape. PHEAA plans to continue investing its proceeds from its other student loan businesses to supplement government funding for the college scholarship program it administers.
That year, it used $ 15 million of its revenue to increase the maximum college scholarship to $ 5,000; the grants do not have to be repaid. When combined with investments from PHEAA’s revenues over the past decade, this additional funding for the grant program increases to over $ 1 billion.
- Pa. maximum government funding for college students to rise to an all-time high of $ 5,000
PHEAA spokesman Keith New said the agency is committed to providing a soft landing for laid-off workers affected by the move. New said federal officials as well as the governor’s administrative office are open to assisting affected employees, if possible, in new positions.
PHEAA signed a contract with the US Department of Education in 2009 to act as the intermediary for the federal government in collecting and tracking payments from student loan borrowers.
It did so to diversify its business, to support its public mission of helping college students in Pennsylvania with college pay. That decision was prompted by the Great Recession when the credit crunch made it difficult to raise money by selling bonds at auction rates to continue offering student loans through the Federal Family Education Loan Program, which Congress ended in 2010.
When the 10-year federal loan service contract expired in June 2019, the U.S. Department of Education requested an extension instead of renegotiating the terms of the contract.
“In the 12 years since PHEAA accepted the terms of its federal service contract, the federal loan programs administered by the Department of Education have become increasingly complex and sophisticated, while the cost of the service business has risen dramatically,” New said in a statement.
“We need to take care of our Pennsylvania residents and they are our priority,” said Sheryl Delozier, R-Cumberland County, who sits on the PHEAA board of directors. “We should do this for 10 years. We are now in our 12th year and haven’t seen a light at the end of the tunnel. This constant “We need a little more time, we need a little more time” is costing Pennsylvania too much and we realize that we need to re-focus and take a step back. “
PHEAA has serviced loans for 8.5 million borrowers. In the process, Delozier and New said that they will work with the servicer who will take over the loans, hopefully to convert as many agency employees as possible to the new servicer. New said the agency anticipates the transition will extend well into next year before it is complete.
He also said the fact that employees are working remotely to service loans during the COVID-19 pandemic may enable them not to move if they take a job with the new service provider. He said what might make these employees attractive to the new servicer is that they are already federally licensed and highly trained under the state student loan program.
If the loans “go to another service provider, they will need employees,” said Delozier. “You will need people who understand the service and everything related to the technical side of things, so these people will be in great demand as to whom we hand over the service to.”
There aren’t that many large federal student loan agencies in the country. In addition to PHEAA, which is unique in that it is a government agency with a public mandate, the others are Navient, MOHELA, and Great Lakes Educational Loan Services Inc.
PHEAA officials are optimistic that they will continue their civil service with income from expanding the commercial service of private student loans, managing their own low-interest loan programs from PA Forward, and using their computers and software to service loans to customers.
“We have other businesses that are robust and growing,” said New. “It’s not a situation where PHEAA is going away, nor is its ability to generate revenue. We’re just getting back to our core business of public service for Pennsylvania. “
Delozier said the agency’s PA Forward loan program shows great promise as it offers loans at a better rate than the state parent company’s PLUS loans in some cases and more competitive rates than other private lenders on student loans, reducing student debt for their college education is reduced. This is of concern to state lawmakers because the average Pennsylvania college student debt burden for college students in Pennsylvania is the third highest in the country, according to LendEdu.
It is no longer a successful line of business for the agency to remain a federal student loan service provider, said Delozier.
“We recognize this and take a step back from the federal government and say this is no longer beneficial to our Pennsylvania residents and we must move on,” she said. “This is a smart move. We understand that we cannot have casualties and we are a quasi-state government agency and we need to look after the people of Pennsylvania.
Jan Murphy can be reached at jmurphy@pennlive.com. Follow her on Twitter at @JanMurphy.
source https://collegeeducationnewsllc.com/pheaa-plans-to-stop-servicing-federal-student-loans-expects-to-lay-off-employees/
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