146 jobs to be cut as Utah terminates student loan contract over “financial loss”

(Scott G. Winterton, KSL, file)

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SALT LAKE CITY – Effective immediately, the Utah Higher Education Aid Authority terminated its contract with the US Department of Education to process student loans, which will result in 146 employees losing their jobs.

The authority, which is a branch of the Utah Higher Education System, has served 1 million student loan clients nationwide over the past nine years under its contract with the Department of Education’s Federal Student Aid Office.

However, “the terms of the contract resulted in financial losses for the organization, and the UHEAA leaders made the decision to terminate the contract,” said a press release from the Utah System of Higher Education.

David S. Schwanke, the authority’s acting executive director, said in a statement: “After careful consideration, the decision to terminate the federal student loan service contract was made in the best interests of the state of Utah and our organization and its long-term financial sustainability.

Affected employees are call center representatives and loan processors.

“We regret that the decision to terminate the contract with the US Department of Education’s Federal Student Aid Office is negatively impacting so many of our valued employees, and we are committed to helping them. to go through this transition over the next few months, ”Schwanke said. .

The authority and the Office of Federal Student Aid will begin transferring accounts to another federal student loan agency “with as little disruption as possible over the next few months,” the press release said.

The Utah Higher Education Assistance Authority is a state government agency established in 1977. Its authority is delegated by the Utah Higher Education Council and is governed by an 11-member board of directors and the commissioner. of higher education in Utah.

The authority administers Utah’s student financial aid programs, including the student loan guarantee program and secondary market and state financial aid as needed.

A press release issued in August announcing the retirement of the organization’s longtime executive director Dave Feitz noted that during his 14 years as head of the organization, the authority oversaw a $ 21 billion student loan portfolio and administered its $ 1.1 billion student loan bonding program, which achieved the best financial results. grades and reduce the cost of going to college for students.

Schwanke, in an interview, said the loan servicing costs exceeded the funding provided by the US Department of Education. Other portfolios managed by the authority produced sufficient income to cover costs.

“We are a profitable organization. It is simply a financial decision to end an unprofitable segment,” he said.

David Woolstenhulme, Utah’s higher education commissioner, said officials hoped the Education Department’s restructuring of the deal would come with a new award “but it was worse than before, so that made it a really easy decision for the board… to make the decision to break the contract. “

In recent years, the cost of servicing the loans was about $ 2 million more than what the contract with the federal government funded, officials said.

In June, the US Department of Education released a Press release announcing that it had signed service contracts with five companies to take over much of its federal student loan portfolio. Earlier this year, the Department of Education announced plans to overhaul its federal system for managing student loans.

Companies include:

  • EdServices Financiers.
  • FH Cann & Associates LLC.
  • MAXIMUS Federal Services Inc.
  • Missouri Higher Education Loan Authority (MOHELA).
  • Texas Guaranteed Student Loan Corporation (Trellis Company).

According to Forbes, the changes are part of the Ministry of Education’s transition to a single, centralized service platform.

Schwanke said the larger restructuring was a separate action and had no impact on student loans that the Utah Higher Education Assistance Authority was managing under the now-terminated contract.

Marjorie cortez

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