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How To Switch Loan Servicers

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What Is A Loan Servicer

Your Loan Servicer is Probably Changing in 2021 and It’ll Be Chaos

When youre shopping for a private student loan, youll get rate quotes from lenders. The lender determines loan interest rates, available repayment options, and borrower eligibility criteria. But once the loan is approved and issued, you may have no more contact with the lender.

After your student loan is approved and disbursed to you, the lender may notify you that you have a loan servicer. Servicers are private companies that are contracted by the lender to manage the loans.

The loan servicer is who you contact to make payments, request an alternative payment plan,or apply for a deferment. If you fall behind on your payments, the loan servicer is the company that will assess late fees or send your account to collections.

Federal Loan Servicers

With federal student loans, the U.S. Department of Education is the lender. The government contracts with multiple companies to handle the loans. As of 2021, there are 10 federal loan servicers:

  • Default Resolution Group
  • Nelnet
  • OSLA Servicing

Not sure who our loan servicer is? If you have federal student loans, you can find out by logging into your Federal Student Aid account dashboard and viewing your loan details. Or, you can call the Federal Student Aid Information Center at 800-433-3243.

How To Change The Servicer On A Federal Student Loan

When a borrower obtains a Federal Direct Student Loan, the initial servicer is assigned by the U.S. Department of Education. The U.S. Department of Education may also change a borrowers servicer occasionally, but the borrower does not get to choose the new servicer.

The assignment of borrowers to servicers is random, to permit comparison of servicer performance. For this reason, the U.S. Department of Education does not let borrowers choose their servicer or switch servicers.

However, there are three ways a borrower can transfer their loans to a different servicer.

  • Choose Public Service Loan Forgiveness . If a borrower files an employer certification form or applies for public service loan forgiveness, their loans will be transferred to FedLoan Servicing , the servicer that specializes in public service loan forgiveness.
  • Apply for Total and Permanent Disability Discharge. If a borrower applies for a disability discharge, their loans will be transferred to Nelnet, the servicer that specializes in disability discharge.
  • Obtain a Federal Direct Consolidation Loan. If aborrower applies for a Federal Direct Consolidation Loan online at StudentLoans.gov, they can choose the servicer.

Borrowers can also change the lender or servicer on a federal student loan by refinancing the loans into a private student loan.

The final option for getting away from a bad servicer is to pay off the loans in full.

Cautions About Changes In Student Loan Servicers

When a borrowers student loan servicer changes, there is a standard process for the transfer of loans to the new servicer.

  • The old servicer will send advanced notice of the change in servicer to the borrower
  • The old servicer transfers the loans to the new servicer
  • The new servicer will provide the borrower with a welcome notice after the transfer is complete

It may take 1-2 weeks for the National Student Loan Data System on StudentAid.gov to reflect a change in servicer. Borrowers who have questions about a change in servicer can call NSLDS Customer Support Center at 1-800-999-8219.

The old servicer will forward any payments you send to the old servicer after the transfer for a few months.

A change in the student loan servicer does not affect the terms and conditions of your loans, just who manages the loans and where you send the payments. You wont need to reapply for deferments and forbearances, as loan status information and repayment plans will be transferred.

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Apply For Loan Consolidation

The transfer process starts by filling out the Federal Direct Consolidation Loan Application and Promissory Note at StudentLoans.gov. You can apply online or print a paper application and mail it to the desired student loan servicer. Have personal and loan information ready when you sit down to fill out the application.

Things To Do If Your Loan Servicer Has Dropped You

Help Employees With Their Student Loan Servicers

Although your student loans will automatically be switched to a new loan servicer, there are still a few things you can do to make sure you’re well-informed during the transition. Here are a few tips to help you prepare for when your servicer changes and when student loan payments resume in February 2022.

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Help You Choose Or Switch Repayment Plans

Your servicer will place you on the 10-year standard student loan repayment plan unless you pick a different one during your exit counseling session around the time you leave school. The standard plan breaks up your balance into 120 fixed payments. But that may be difficult to afford if you have a lot of debt.

Student loan servicers can help you figure out if youre eligible for one of the governments income-driven repayment plans, which cap your bills at a percentage of your income. See what youd pay on an income-driven plan using the governments repayment estimator tool.

If you decide to switch, your servicer will process your application and annual income recertification, which you must submit to stay eligible.

The Fedloan Lawsuit Of 2017

In 2017, the Massachusetts Attorney General started an investigation against FedLoan Servicing. The base of this lawsuit, allegedly, was the poor customer service FedLoan Servicing provided to customers.

Among federal loan servicers, FedLoan Servicing has a notorious place. The loan portfolio of its parent company, called Pennsylvania Higher Education Agency, is worth more than $420 billion.

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Other Reasons Why The Student Loan Servicer Might Change

Dont be surprised if your student loan servicer changes for reasons beyond your control.

A borrowers student loan servicer might change if the servicers contract with the U.S. Department of Education is not renewed or if a new servicer is added. Servicing contracts currently last five years, but can be renewed.

The U.S. Department of Education also tries to ensure that all of a borrowers federal student loans, including both undergraduate and graduate loans, are with the same servicer. If some of a borrowers loans are with a different servicer, the U.S. Department of Education might change the servicer on those loans. This is called serialization.

Lender And Bonus Disclosure

Want To Fire Your Loan Servicer?: The Mortgage Professor #2

All rates listed represent APR range. Commonbond: If you refinance over $100,000 through this site, $500 of the cash bonus listed above is provided directly by Student Loan Planner.

CommonBond Disclosures: Refinancing

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC , NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. If you choose to complete an application, we will conduct a hard credit pull, which may affect your credit score. All Annual Percentage Rates displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.

CommonBond Disclosures: Private, In-School Loans

Student Loan PlannerĀ® Disclosures

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Tips For Dealing With Your Loan Servicer

The Department of Education Ombudsman gives these tips for staying in touch with loan servicers:

It is usually best to communicate with your loan servicer in writing, because youll have a physical record of what has been said and done.

  • Keep careful notes of all conversations you have. Follow up in writing so you have a physical record of what has been said and done.
  • Request a copy of your customer service history some loan servicers make available copies of the notes that customer service representatives make on your account.
  • When you speak with someone on the phone, make a note of whom you speak to and when, and what was said. When you use mail, keep a copy of your letter and of any replies you receive.
  • Save the originals of all receipts, bills, letters, and e-mails regarding your account. Provide copies of the originals if you are asked for them. Send letters via certified mail, with a return receipt requested.
  • Dont let the emotion of the moment get to you. If you are not getting a proper response to your questions, calmly explain again what information or resolution you are seeking.
  • Be polite and courteous, but dont be afraid to give the detail of any incident and to state your concerns. Write down the facts in the order they took place and stick to what is relevant. Include important details such as your account number at the top of your letter.
  • Ask for a response in a reasonable time, and be sure to tell the customer service representative how you can be reached.

What Should I Expect

  • The Department of Education will send you a notice. You should also receive notices from your current servicer prior to the transfer. If you need help after the transfer you can call your new servicer. Be on the lookout for more information.
  • Your payment amounts and CARES Act forbearance period stay the same. Even though your loans will have a new servicer, it will not impact your balance, existing terms, interest rates, or available repayment plans.

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Get Familiar With The Processes

An individual should not rely entirely on loan servicers employees in important matters like student debt. Only knowledgeable borrowers can confirm whether the loan servicer provides the right service/advice or not.

Hence, it is recommended to get familiar with the student aid programs. If you are receiving student loans, read about their types, application issues, requirements. For forgiveness program application, first clearly understand the eligibility conditions. Once you are armed with information, contact the loan servicer to discuss your options.

Monitor Your Credit Report

change student loan servicers

Financial advisor R.J. Weiss of The Ways to Wealth says borrowers who are moving student loan servicers should keep an eye on their credit reports more often than usual. However, you should make sure you check reports from all three credit bureaus and not just one.

“It’s important to check all three because the reports are not always the same,” he says.

Weiss says you want to monitor your credit reports because mistakes can be made during the transfer process. For example, it’s not uncommon for one provider to report an unnecessary late payment or forget to remove the loan from your report in a timely fashion.

To monitor your credit reports, head to AnnualCreditReport.com, where you can check reports from all three bureaus for free.

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Guide To Switching Federal Student Loan Servicers

Switching federal student loan servicers is not easy, but if you are desperate enough, there are a few ways to get it done.

Federal student loan servicing has been a major concern of borrowers for years.

Borrowers often complain that they are given incomplete, or even worse, wrong information from the company responsible for answering all of their student loan questions. Many attribute the high default rate on federal student loans to the servicers inability to explain the many options available to borrowers.

One of the big downsides to federal loans is dealing with these servicers. Unfortunately, the Department of Education makes it very clear that borrowers do not get to select their loan servicer.

The good news is that there are few tricks that are available to get loans transferred from one servicer to another.

Current Federal Loan Servicers

In June 2020, the U.S. Department of Education announced that it had signed contracts with five new servicers as part of the Next Generation Financial Services Environment . Next Gen will provide a single web and telephone interface for all of the federal student loan servicers through a centralized loan servicing platform. Next Gen also intends to provide improved accountability and better-quality customer service .

Two of the new servicers EdFinancial Services LLC and Missouri Higher Education Loan Authority are currently servicers in the Direct Loan program. The other three servicers F.H. Cann & Associates LLC, MAXIMUM Federal Services Inc. and Texas Guaranteed Student Loan Corporation have not previously participated in the Direct Loan program.

The current servicing contracts will expire in December 2021 or March 2022:

    In July 2021, FedLoan Servicing and Granite State both announced that they will not renew their contracts with the Department of Education. They will be leaving the federal student loan servicing program by December 31, 2021.

    One additional servicer, CornerStone, terminated its contract with the U.S. Department of Education in late 2020 for financial reasons. Utah Higher Education Assistance Authority operates CornerStone.

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    Firm Is The 14th Lender To Sign Up For Lower

    Microfinance Ireland has partnered with the Strategic Banking Corporation of Ireland to lend to small businesses in Ireland, with State-backed agency committing up to 30 million in funding for the loans.

    This makes Microfinance Ireland the 14th lender to sign up for lower-cost loans, expanding the options for small and medium sized businesses.

    SBCI chief executive said the announcement offered a new option that would go a long way towards helping businesses thrive into the future.

    Microfinance Ireland will offer lower rates on its standard loans, providing finance through the Governments Microenterprise Loan Fund. The loans will have a term of up to five years, with amounts up to 25,000 and flexible repayment schedules.

    Microfinance Ireland chief executive Des McCarthy said the company had seen a very significant increase in demand for loan products over the past 18 months. This funding will allow us to support an even greater number of start-ups and established micro-enterprises with fewer than 10 employees and up to 2 million annual turnover, he said. The rate offered on this SBCI funding will lead to a reduction in the rates we charge our borrowers thereby making our loans more affordable for our customers and supporting more of them with their business plans.

    • Topics:

    Choose Your New Loan Servicer

    How Does Switching Your Homeowners Insurance Work?

    During the application process, theres an option to select a new loan servicer. Make your selection, completely fill out the rest of the application, and then submit it.

    Current federal student loan servicers include:

    • ECSI
    • Great Lakes Educational Loan Services
    • HESC / EdFinancial Services
    • Missouri Higher Education Loan Authority
    • Navient
    • OSLA

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    Federal Student Loan Servicers Changing For Millions Of Borrowers

    Federal student loan servicers changing for millions

    FOX 26 Consumer Reporter Heather Sullivan has some smart sense for those who are paying services to handle their student loans.

    Houston – When the pause on federal student loan payments ends January 31, millions of borrowers will discover their loan servicing company has changed. Loan servicers are the company you pay that manages your account.

    The Consumer Financial Protect Bureau is sounding the alarm that this transition could lead to missed or delayed payments. So here’s what you need to know.

    “Reach out to your servicer today, and I caution you dont wait until January 29 to do this,” said Scott Buchanan, Executive Director of the Student Loan Servicing Alliance.

    The time is now to act on your federal student loans.

    FedLoan Servicing and Granite State have announced they will not service these loans next year.

    The U.S. Department of Education is creating Next Gen, the Next Generation Financial Services Environment, with a centralized loan servicing platform, and transitioning from nine loan servicers to these five:

    Edfinancial Sevices, LLC.Missouri Higher Education Loan Authority .Texas Guaranteed Student Loan Corp.

    “Some borrowers will be transitioning to a new servicer over the coming months,” said Buchanan.

    That means before the new company takes over your account, you should make sure your contact and banking information is current.

    Why Are Federal Student Loan Servicers Changing

    In 2020, the U.S. Department of Education introduced a plan to modernize technology at the office of Federal Student Aid and improve the overall experience for federal student loan borrowers. Former Education Secretary Betsy DeVos spearheaded the initiative, known as the Next Generation Financial Services Environment, or simply Next Gen.

    Student loan borrowers currently work with one of nine different servicers on four different platforms, which experts say can lead to inconsistent experiences and confusion. The goal of Next Gen is to make student loan repayment less complicated for borrowers, parents and student aid partners alike with a single, centralized loan management system.

    The initiative also aims to improve borrower outcomes, with fewer students experiencing delinquency and loan default. Next Gen’s new technology should also lead to fewer headaches for borrowers when student loan servicers change and fewer mistakes, like lost payments and other processing problems.

    “The vision of federal student loan borrowers being able to engage with one interface rather than toggling between multiple servicers is sorely needed and will be well received by both current and future borrowers,” says Greg McBride, CFA, Bankrate chief financial analyst.

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    Making Sure Your Loan Servicer Is Working With You

    Understanding the complicated world of student loan repayment is no easy feat, and it gets even harder if your loan servicer isnt giving you all the information you need to manage your student loans.

    Not only should your loan servicer explain your options for repayment plans and forgiveness programs, but it should also help you choose the repayment strategy thats best for your individual situation.

    Unfortunately, some loan servicers have led borrowers into forbearance or income-driven plans even when these approaches were unnecessary and cost them extra money in the long run.

    Because your loan servicer might not always give you the best guidance, its crucial to empower yourself with knowledge about your student loans. Learn about your options for repayment .

    Using these student loan calculators can also help you estimate the long-term costs of your loans and come up with a solid repayment strategy.

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