As part of a larger cost-cutting effort, the student loan servicer FedLoan’s call center in Chester will close by the end of next year, according to Keith New, spokesperson for the Pennsylvania Higher Education Assistance Agency, which runs the center.

“We currently have 77 employees working at Seaport and we have been working to minimize any impact this may have," New said in an emailed statement. "This includes providing as much notice as possible while ensuring that employees have the option of transferring to another facility that manages FedLoan servicing calls, including our headquarters in Harrisburg,” he said. As of Dec. 2, PHEAA had a total of 2,714 employees.

FedLoan is part of the state-run Pennsylvania Higher Education Assistance Agency (PHEAA), which services about 7.5 million federal student loan borrowers. The agency faces investigations from state attorneys general and lawsuits from disgruntled customers.

The agency, which has outsourced jobs in recent years to Florida and India, said there are no plans to close additional facilities in Pennsylvania.

“Our existing call centers are needed to maintain performance levels on our current servicing contracts, both commercially and for federal loans, and to support the PA State Grant Program and other special programs that we administer for the Commonwealth,” New said in the statement. According to current job listings on PHEAA.org’s website, call centers operate mainly out of Harrisburg, Mechanicsburg, Pittsburgh, and State College.

In August, PennLive.com reported that PHEAA also plans to vacate the space it uses for a call center in the Westport Business Center in Lower Allen Township, Cumberland County. That call center, which employs nearly 500, is expected to be closed by the end of 2019. The workers in Lower Allen are being moved to the agency’s headquarters in Harrisburg.

CEO, James Steeley, outside the Pennsylvania Higher Education Assistance Agency, one of the largest servicers of federal loans, in Harrisburg, February 13, 2019.
JESSICA GRIFFIN / Staff Photographer
CEO, James Steeley, outside the Pennsylvania Higher Education Assistance Agency, one of the largest servicers of federal loans, in Harrisburg, February 13, 2019.

“We heard they were closing some facilities,” said Guy Ciarrocchi, president and CEO of the Chester County Chamber of Commerce. “So far it doesn’t affect any of our member companies or their employees.”

Americans owe about $1.6 trillion in college student loans as of 2019. The federal student loan system is poorly run, the default rate among students is growing, and the harm is especially apparent in Pennsylvania, where students graduate with some of the highest debt in the nation, according to The Inquirer’s reporting as part of the Debt Valley series.

State-supported colleges, such as Pennsylvania State University and Temple, charge tuition higher than those in other states, and the loan servicer PHEAA is a major cog in the nation’s byzantine college lending system.

Federal contracts under the Department of Education were renewed until Dec. 2021, according to PoliticoPro (subscription required). The DOE extended the contracts with its four largest student loan servicers — Navient, Nelnet, Great Lakes and the Pennsylvania Higher Education Assistance Agency, which operates under the name FedLoan Servicing — had been set to expire in December. The department has extended those contracts for at least another year, with the option of additional extensions through December 2021.

The department is also in the process of further extending, for the same amount of time, the contracts of its five smaller, not-for-profit loan servicers whose contracts are set to expire in March 2020.

The only student loan servicer with more complaints is Wilmington-based Navient Corp., which operates a call center in Wilkes-Barre. Navient fought off a proxy battle by an activist hedge fund, settled in May, and is still fighting a suit from Pennsylvania Attorney General Josh Shapiro for allegedly offering predatory loans.

Meanwhile, top executives at PHEAA and Navient are rewarded handsomely.

The Inquirer in July compiled a list of student loan servicer CEOs and their salaries based on data from Allied Progress, a consumer watchdog group, nonprofit IRS filings, and OpenSecrets.org.

FedLoan pays CEO James Steeley $330,000 a year, while for-profit Navient paid CEO Jack Remondi $6.9 million.