FAFSA promissory note legal loophole? Department of Education vs SBA loan responsibility

This is actually interesting... I wonder if there's some fine print in the MPN that allows them to transfer/assign your loans. Have you read through the ENTIRE agreement? There might be a clause about "successors and assigns" or something similar that would legally allow them to move your loan to another department. I'd check that before getting too hopeful!

I worked in financial aid for several years, and I can tell you this isn't a loophole that will work. The Department of Education has the authority to designate servicers and administrative bodies to handle your loans. While the SBA (Student Borrower Administration) may be the new administrative body, your loans are still technically owned by the Department of Education - they're just using a different administrative structure to manage them. Your MPN also likely contains language about "agents" or "designated entities" that can act on behalf of the Department of Education. This was put in place specifically so they could change servicers and administrative arrangements without creating new contracts with borrowers. If you stop paying, you'll still default on federal loans, and all the consequences will apply.

lol good luck with that strategy... the government ALWAYS finds a way to get their money. my cousin tried something similar with a 'sovereign citizen' argument and ended up with wage garnishment. don't play games with the feds, they play harder

The issue you're referencing is primarily administrative. The Student Borrower Administration (SBA) is just the new name for what was previously a branch within the Department of Education that handled federal student loans. It's more of a restructuring/rebranding than an actual transfer to a completely different agency. Your promissory note includes language allowing the Department of Education to "verify information with other federal agencies" and typically includes provisions about servicing arrangements. The legal entity holding your debt hasn't actually changed in the way you're thinking - it's still the federal government, just under a different administrative structure. If you're concerned about the legitimacy of your loan servicer, you should verify through studentaid.gov that your loan servicing information is correct. That's the official source to confirm who should be receiving your payments.

omg I've been wondering the EXACT same thing!!! My loans moved from Great Lakes to some new servicer I never heard of and I NEVER signed anything agreeing to that. It feels so sketchy. Like how do I even know this new company is legit and not a scam??

Two weeks ago I was having a similar issue - couldn't get through to anyone to verify whether my loan had been transferred properly when the FSA website was showing different information than my servicer. I spent HOURS trying to get through to someone at Federal Student Aid. Finally used Claimyr (claimyr.com) to get through to a human and actually fixed the problem in about 15 minutes once I finally talked to someone. They have a video demo showing how it works here: https://youtu.be/TbC8dZQWYNQ Totally worth it to get actual clarification directly from FSA about who legitimately has your loan and who you should be paying.

This is an interesting legal question but here's something to consider: even IF there was some technical breach of contract (big if), the remedy probably wouldn't be loan forgiveness. More likely, a court would just order the proper paperwork to be filed to correct the administrative change. Courts generally look for remedies that address the actual harm, and if the only "harm" is that a different federal entity is collecting, there's not much actual damage to you.

Update: I called FSA (finally got through) and they confirmed what most of you are saying. The Student Borrower Administration is still part of the federal system, and my loans weren't actually transferred to a different entity in the legal sense. It's more of an internal reorganization of how they handle the loans. My obligation remains the same. Thanks for all the input!

Thanks for sharing this question and following up with the resolution! This is actually a really common concern when people see changes in their loan administration. I think a lot of borrowers get worried when they see unfamiliar names or entities handling their loans, especially since there have been so many changes in federal loan servicing over the years. Your experience shows how important it is to go directly to the source (FSA) when you're unsure about these administrative changes rather than just assuming something shady is going on. Good on you for doing your due diligence!

This is such a great example of how confusing federal loan administration can be! I'm relatively new to dealing with student loans and honestly, when I first saw different names and entities showing up in my loan documentation, I had similar concerns. It's really easy to assume something fishy is happening when you're not familiar with how the federal loan system works behind the scenes. Your question was totally legitimate - the fact that you took the time to actually read through your MPN and notice the specific language shows you're being a responsible borrower. And following up with the official resolution is so helpful for others who might have the same concerns. Thanks for sharing this whole experience!

As someone who's just starting to navigate the federal loan system, this whole discussion has been incredibly eye-opening! I had no idea how complex the administrative side of student loans could be. The fact that entities can change names or restructure internally while still being part of the same federal system is something I never would have understood without reading through this thread. It's really smart that you actually read through your MPN carefully - I'll admit I probably just skimmed mine when I signed it. This makes me want to go back and review all my loan documents more carefully so I understand exactly what I agreed to. Thanks for sharing your experience and the follow-up - it's really helpful to see how these kinds of concerns can be resolved by going directly to the official sources!

As someone who's completely new to federal student loans, this entire thread has been such a lifesaver! I was actually starting to panic because I noticed similar changes in my loan documentation and didn't understand what was happening. Reading through everyone's explanations about how the federal loan system works administratively really put my mind at ease. It's so easy to assume something suspicious is going on when you're not familiar with how these government entities can restructure internally. @Gemma Andrews, I really appreciate that you asked this question and then followed up with the official answer you got from FSA - it shows the importance of going directly to the source when you're unsure about something this important. This whole discussion has motivated me to be more proactive about understanding my loan terms and knowing where to get reliable information when I have concerns!