Granite State Management and Resources, a federal student loan servicer managed by the New Hampshire Higher Education Association Foundation, recently announced plans to not extend its contract with the U.S. Department of Education at the end of the year. Additionally, Connecticut State Colleges and Universities is canceling $17 million of student loan debt, a move that will impact more than 18,000 current and former students. Here’s what to know about this week’s student loans news.
2 current trends within student loans for the week of July 26, 2021
1. Granite State Management and Resources ends contract with Federal Student Aid
Granite State Management and Resources (GSM&R) announced in a press release that it will be ending its contract with the U.S. Department of Education, effective Dec. 31 of this year. Currently, GSM&R acts as the student loan servicer for 1.3 million borrowers with federal student loans, handling payments, forbearance requests and repayment plans. GSM&R will no longer service federal student loans when the contract comes to an end and will instead focus on its private student loan product, EDvestinU.
The Department of Education will be responsible for reassigning the 1.3 million borrowers currently managed by GSM&R to a different federal servicer. Federal Student Aid Chief Operating Officer Richard Cordray stated that individuals currently borrowing with GSM&R can anticipate “early and frequent communications and clear guidance” about the upcoming transition.
How this affects student loans
GSM&R is the second federal servicer to cancel its contract with the Department of Education this month. The Pennsylvania Higher Education Assistance Agency (PHEAA), also known as FedLoan Servicing, announced plans to end its contract on Dec. 14, 2021.
Between the two servicers, roughly 10 million borrowers will be reassigned to different federal servicers through the Department of Education, adding additional pressure to the end of the administrative forbearance period at the end of September. The department also announced earlier in the year that it’s making major steps toward revising the student loan repayment process by creating one centralized student loan platform.
Borrowers with loans currently managed by GSM&R and PHEAA can expect communication from their servicer or from the Department of Education. Borrowers impacted by the move will see changes to their servicer, but the details of their loans will not change.
2. Connecticut State Colleges and Universities forgives debt for more than 18,000 students
Connecticut State Colleges and Universities (CSCU) will forgive institutional student loan debt accumulated between the summer 2019 and spring 2021 semesters, resulting in $17 million forgiven between 18,161 former and current students.
The money used to forgive the debt comes from the federal Higher Education Emergency Relief Fund, which was designed to help colleges and students affected by the pandemic. “By eliminating the debt those students owe to institutions, we are removing a hurdle that prevents far too many people from continuing their educational journeys,” stated CSCU President Terrence Cheng.
In addition to clearing this outstanding debt, CSCU will also waive class registration holds and account holds, granting registration status to students who weren’t able to register for classes due to delinquent balances.
How this affects student loans
CSCU follows Fayetteville State University and Delaware State University, among other colleges, in using federal pandemic relief funds to forgive student debt.
This forgiven debt is owed to the university; debt owed to private student loan lenders or the federal government is still outstanding. However, clearing institutional debt allows current students with defaulted loans to register for classes, and it allows former students to focus on paying back other forms of student loans.
Here’s how you can get prepared
Whether you’re new to student loans or well into repayment, it’s wise to stay informed about how your student loan rates could change. As 2021 continues, more opportunities for cheaper loans or loan forgiveness could open up; keep an eye on the Bankrate student loans news hub for the latest trends.