Another student-loan company is shutting down its services, bringing total number of borrowers in limbo to nearly 10 million

• Granite State Management and Resources is not renewing its loan-servicing contract after December.
• The Pennsylvania Higher Education Assistance Agency announced the same thing two weeks ago.
• Nearly 10 million borrowers will have to be moved to new servicers before the payment pause lifts.

After the Pennsylvania Higher Education Assistance Agency (PHEAA) announced two weeks ago it would not extend its federal contract to service student loans, another student-loan company followed suit on Monday, bringing the total number of borrowers between the two who will have to switch servicers to nearly 10 million.

Granite State Management and Resources (GSMR), a nonprofit student-loan company that holds 1.3 million borrower accounts, notified the Education Department that it would not seek renewal of its federal contract to service student loans after December 31, Politico first reported. As the department is planning to lift the pause on student-loan payments in October, those borrowers will have to be transitioned to a new servicer, on top of the 8.5 million borrowers who were previously with PHEAA.

"FSA (Federal Student Aid) and Granite State will work together to ensure that student loan borrowers will transition smoothly to a different loan servicer," Richard Cordray, the director of FSA, which is part of the Education Department, said in a statement obtained by Insider. "Our wind-down plan will include early and frequent communications and clear guidance about what borrowers should expect."

Cordray added that FSA would provide strong oversight over services to ensure borrowers are "supported and not harmed during this transition."

GSMR could not immediately be reached for comment.

Over the past decade, student-loan servicers have been under close scrutiny by some lawmakers on Capitol Hill who want to ensure borrowers are protected. For example, after PHEAA's announcement two weeks ago, Sen. Elizabeth Warren of Massachusetts said borrowers could "breathe a sigh of relief" knowing their loans would no longer be managed by "an organization that has robbed untold numbers of public servants of debt relief."

"The changes in student loan servicing present a golden opportunity to fix the system so that it serves borrowers rather than big corporations - that includes building better accountability into future servicing contracts with the Education Department," Warren told Insider on a statement. "I'm also pushing for strong oversight to ensure that borrowers are protected during this transition."

A PHEAA spokesperson said in a statement at the time that since the company accepted the terms of its federal servicing contract, the loan programs had grown "increasingly complex and challenging while the cost to service those programs increased dramatically."

And GSMR fell under scrutiny as well. Since 2019, the Consumer Financial Protection Bureau - an agency that Warren spearheaded to protect consumers - has received 56 complaints from borrowers about the company, with the main complaints surrounding inaccurate credit reporting, poor communication, and attempts to collect debt not owed.

Insider previously reported that communication from servicers was a big issue with borrowers who could have paid off their debt but couldn't seek help from the company that was charging them for their loans.

The Education Department has not yet announced which companies will take over GSMR's borrower accounts, and this development will likely serve as support for Democrats' calls to extend the pause on student-loan payments to allow more time to deal with these administrative difficulties.

"Nobody's ready for student loan payments to resume," Warren wrote on Twitter. "Not borrowers. Not the student loan companies. And certainly not our economy. We must extend the pause on payments and #CancelStudentDebt."