We know how frustrating it can be when dealing with unresponsive student loan servicers or otherwise problematic. The good news is that you aren’t obligated to work with the servicer who was assigned to you.
You can choose to switch to another lender. Refinancing and loan consolidation are two options for changing student loan servicers. However, both come with drawbacks.
This guide will show you what you need to know to switch your student loan servicers.
But before we begin, keep in mind that “loan servicer” and “lender” are different, even though they’re used interchangeably.
Student Loan Servicer And Lender: What’s The Difference?
The loan lenders are the organizations that underwrite student loans. For example, the U.S. Education Department is the lender for federal student loans. A bank or a private organization is the lender for private student loans.
The loan servicers are the third-party organizations that manage the loan after being disbursed. They function as a go-between for you and your lender. They take and handle payments and, when appropriate, respond to borrower questions.
What Is A Student Loan Servicer?
Lenders will give you rate quotes while you’re looking for a private student loan. The repayment alternatives available, the loan’s interest rate, and the borrower qualifying criteria are all determined by the lender.
However, you may not hear from the lender again once the loan is accepted and issued.
The lender may notify you that you have a loan servicer once your student loan has been approved and disbursed. Lenders hire private organizations to manage their loans, known as servicers.
The loan servicer is where you request an alternate payment plan, make payments, or apply for deferment. In addition, the loan servicer is the business that will apply late fees or send your account to collections if you fall behind on your payments.
How To Switch Student Loan Servicers
1. Refinance Your Student Loans
If you have federal or private student loans, student loan refinancing allows you to transfer them to a new lender.
When you refinance your loans, you negotiate with a private lender to take out a new student loan for the amount of your current private and federal loans. The loan length, interest rate, and minimum monthly payment on the refinancing loan are different from those on your former debt.
You’ll likely have a new loan servicer when you refinance, and your loans will be combined. So you’ll have one student loan and monthly payment to worry about instead of multiple.
While refinancing might help you pay off debt and simplify payments, there are some drawbacks to consider if you have federal student loans.
You’ll lose out on federal benefits, including income-driven repayment plans and the option to apply for student loan forgiveness. So before you submit your refinancing application, make sure to think about these advantages.
2. Consolidate Your Student Loans
With federal student loans, you’re already assigned a student loan servicer from the Department of Education to manage your monthly payments.
Even though you can’t choose your loan servicer at the outset, you do have the option of switching to a different one if you consolidate your federal student loans. Here’s how to switch student loan servicers with federal loans:
Consolidation occurs when you combine two or more federal student loans into one new loan. Then, you’ll have the option of switching to a different repayment plan, such as income-driven repayment or graduated repayment. You’ll also get a new interest rate.
Also, you’ll have the option of selecting whichever student loan consolidation servicer that’s best for you.
However, as stated earlier, some loan servicers’ contracts will expire without renewal. So you can keep your present loan servicer if you’ve had no problems with them. But, if you want to switch student loan servicers, read customer reviews on sites like the Better Business Bureau (BBB) or Consumer Affairs.
You can select the most suitable loan servicer for you by understanding how other borrowers fared.
3. PSLF Can Help Change Your Student Loan Servicers
If you apply for Public Service Loan Forgiveness (PSLF), your loan servicer will likely change. After 120 qualifying monthly payments under a qualifying repayment plan, the PSLF forgives Direct Loan balances tax-free. But you have to be working full-time for a qualified employer.
The official loan servicer for the PSLF program is FedLoan Servicing. Therefore, your loans will be moved from your previous to Fedloan Servicing from your previous loan servicer when you apply for PSLF.
Payments made under a plan based on your income, such as Income-Based Repayment, count toward PSLF.
You must submit an employer certification form if you wish to pursue PSLF. When you send the application, your loans will be moved from your existing student loan servicer to FedLoan Servicing.
Again, FedLoan Servicing exists in the student loan world, but you’ll not have to do anything. The federal government will take care of it. However, don’t leave things up to chance. You have to take control of your student loans.
So here’s what we recommend you do:
Do This If Your Student Loan Servicer Is Changing
You should retrieve all of your tax forms, earlier statements, and other documentation if you have student loans with one of the servicing companies not renewing its contract.
You should also carry out the same process if your servicer has sold your loans to another company. Keep these documents in places where you can access them quickly. Some documents may be lost during the changeover therefore having your copies is essential.
Before your loan servicer changes, file an employer certification form if you’re working toward PSLF. In addition, ensure you have copies of any PSLF certification forms you’ve already submitted.
How Do I Find My Federal Student Loans?
If you have federal student loans, signing into your Federal Student Aid account will locate your loan servicer using your FSA ID.
You’ll see your student loan servicer and other loan details once you’ve visited your dashboard. Alternatively, you can call to find your federal student loan servicer.
You will also find other information on your student loans, such as interest incurred, the types of student loans you have, outstanding balances, and the loan amounts, in addition to identifying your loan servicer.
How To Find Your Private Student Loan Servicers
It may take more effort to locate your loan servicer if you have private loans. If you have your login details, sign in to your student loan accounts or review your most current student loan statement.
You can also track down your loan lenders by seeking a credit report. AnnualCreditReport.com provides free access to your credit reports from the three major credit agencies.
Your private student loan lenders should be listed on your credit record. Call them using their phone number to find out who is in charge of your student loans.
How To Know If A Student Loan Servicer Is Right For You
Given the many headlines of unethical dealings of loan servicers, are any of the student loan servicers operating in the best interests of borrowers?
The Consumer Financial Protection Bureau’s (CFPB) database of complaints is one place to look for information about possible student loan servicers.
It’s also a good idea to call your friends or relatives who have student loans themselves, in addition to reading customer reviews. If any of them have had bad experiences with a loan servicer, you’ll know to avoid them.
You can check online lenders and banks with excellent customer service and affordable interest rates for private refinancing if you have private loans.
How To Switch Student Loan Servicers: How Your Loan Servicer Could Change
Apart from using refinancing and consolidation to change your servicers, there are other reasons your loan servicer could change. However, in these cases, you don’t get to choose your servicer; instead, one will be assigned to you.
Let’s go through a few of them.
When You Pursue Total And Permanent Disability (TPD) Discharge
If you seek TPD discharge, your loans will be transferred to Nelnet. Nelnet routinely monitors TPD applicants for three years to comply with TPD discharge requirements.
You must present paperwork from the Department of Veterans Affairs, a physician, or the Social Security Administration (SSA) to be eligible for TPD loan cancellation.
When You Apply For PSLF
Your loan servicer may change if you’re seeking the Public Service Loan Forgiveness program. The PSLF is a government program that forgives loans for public employees after ten years of service.
The sole servicer that presently manages PSLF applications is FedLoan Servicing (run by the Pennsylvania Higher Education Assistance Agency), which means that if you are approved into the program, your loans will be placed under their administration.
This could change soon, so check the government’s official website to see if you’ll be transferred to a new servicer.
The U.S. Education Department Can Transfer Your Loans
The Department of Education may shift your loans from one loan servicer to another while you’re repaying them. If your servicer changes, you’ll be notified, so you know where to send your payments.
To avoid missing this vital information, ensure you have the current contact mailing address and contact information on your student loan accounts.
Also, check your online accounts now and then to know if you’re paying the right loan servicer on time.
Reasons Why Borrowers Change Student Loan Servicers And What They Get Wrong
Poor customer service is a common reason for borrowers to switch loan servicers. This could involve receiving inaccurate or misleading information or difficulties contacting a representative.
However, switching loan servicers rarely solves your concerns.
And that’s because your concerns may have more to do with the constraints on the servicer’s authority and the design of the loan program, rather than the servicer being incompetent.
Still, if you’ve had a string of bad experiences with your current servicer and are about to consolidate or refinance your debts anyhow, switching servicers might be a good option.
Some Student Loan Servicers Didn’t Renew Their Contracts.
Three reputable student loan servicing companies didn’t renew their contracts with the U.S. Education Department. Because of that, those firms will stop servicing federal student loans. Among the companies are:
- Granite State Management Resources
If you were dealing with one of them, your student loan servicer would change. But the good news is that they aren’t the first servicers to abandon the DOE.
Furthermore, if your current student loan servicer doesn’t extend its contract, you’ll not be required to do anything to switch student loan servicers.
Instead, the Department of Education will handle the situation and switch your student loan servicer on your behalf.
Developments Of Next Generation Financial Services Environment (Next Gen)
The U.S. Education Department has signed contracts with five companies to provide direct customer service and back-office processing support to federal student loan borrowers and partners at postsecondary institutions.
These companies are:
- F.H. Cann & Associates,
- Missouri Higher Education Loan Authority,
- EdFinancial, and
- Trellis Company.
The new contracts are part of a larger plan called Next Generation Financial Services Environment, or Next Gen, to modernize the delivery of federal financial aid programs.
The FSA unveiled Next Gen in 2017, which will improve the infrastructure that distributes federal student loans and other financial aid programs. The Next Gen will eventually affect every area of the system, from aid applications through student loan repayment and collection activity.
Next Gen will consolidate all student loan servicing operations behind a consolidated loan processing platform in the future and change accountability criteria for loan servicers.
Essential Things To Know About Private And Public Loan Servicers
Your Private Loan Servicer Can Change
It’s also possible that your private loan servicer will change. This usually occurs when a loan servicer company shuts down or is sold.
You May Lose Certain Features
You may lose some appealing advantages if you combine your loans with another company, such as automatic biweekly payments instead of monthly installments.
Specify where you want your extra money to go if you set up something similar with your new servicer. For example, certain loan servicers won’t automatically apply it to interest.
Your Federal Loan Servicer Can Change
Your federal student loan servicer may change for several reasons. First, because the U.S. Department of Education lost its contract with your servicer, you may see a change affecting additional borrowers.
If you apply for PSLF, you will also be assigned a new servicer. Currently, just one servicer administers accounts enrolled in the PSLF program for the U.S. Department of Education. As a result, if you join up for this or other similar programs, you might obtain a new student loan servicer.
If you take out a Direct Consolidation Loan, you will also be assigned a new servicer, albeit you will be able to select your preferred servicer in this situation.
Your Autopay Transfer To Your New Loan Servicer Might Not Work
If your monthly payments are deducted automatically from your bank account, you’ll most likely need to re-enroll after the transfer is complete.
It’s critical to do so because most loan servicers don’t inherit your prior permission and demand a new one. If you don’t re-enroll, you may spend months without any payment on your student loans, and that will result in default.
Furthermore, because automatic payments are usually the key to having a lower interest rate, your rate may go up if you don’t restore autopay.
Should You Change Your Student Loan Servicer?
It depends. But before you change your student loan servicer, do your homework first. Switching loan servicers isn’t always the best solution, and there’s no assurance that a new loan servicer will give better service than the one you have now.
Check the rates of various lenders if you’re thinking about refinancing your student loans. And if you need assistance, let an expert guide you. That can help you make an informed decision.
It’s not simple to navigate the student loan payments. And it’s made even more difficult if your loan servicer isn’t providing you with all of the information you need to handle your debts. Unfortunately, some student loan servicers can even make it much worse. Unfortunately, some loan servicers have steered borrowers into income-driven repayment programs or forbearance that were unnecessary and ultimately cost them more money. Because your loan servicer may not always provide you with the best advice, you should learn as much as you can about your student loans.