Should Borrowers Be Worried About A Student Loan Servicer Transition
Some reports of the servicers not renewing their contracts have taken dramatic tones, questioning how smoothor notthe loan servicer transition will go. Theres also the extra layer of FedLoan servicing borrowers seeking PSLF, which requires 120 qualifying payments over 10 years to qualify for forgiveness.
Will the transition be chaos? Will borrower payments and information get lost during the switch?
One expert doesnt think so.
Dont freak out, says Betsy Mayotte, President of the Institute of Student Loan Advisors. Servicer transfers happen. 99.99% of the time, everything goes fine.
Lawmakers also have their eyes on the transition. Sen. Elizabeth Warren , who has been a harsh critic of the student loan system, told Forbes Advisor that shes pushing for strong oversight to ensure that borrowers are protected during this transition. She also sees these servicer changes as a shot at reforming the system as a whole.
The changes in student loan servicing present a golden opportunity to fix the system so that it serves borrowers rather than big corporations, Warren said in a statement. That includes building better accountability into future servicing contracts with the Education Department.
Other Federal Student Loan Servicers
The Department of Education has agreed to a two-year extension of servicing contracts with several of its other federal student loan servicing contractors including Great Lakes Higher Education, Edfinancial, MOHELA, Nelnet, and OSLA. Borrowers who have loans serviced by these companies should therefore not see any immediate changes to their servicer.
How To Get Info About Your Aes Student Loans
If its been years since you took out your student loans or youre not sure if AES is, in fact, your servicer, its easy to check that.
- Log into the National Student Loan Data System : This is the database that records all student aid you receive, including federal student loans. You can log in with your FSA ID to view your student loan balances and history, including the servicers assigned to each account.
- Check your credit reports: AES reports loan information to credit reporting agencies, so if you have an AES student loan, you should see it listed on your reports. You can request a free credit report from all major credit bureaus at AnnualCreditReport.com.
In addition to verifying AES student loans independently, you can also reach out to AES for information about these accounts.
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What Is Loan Servicing
Loan servicing refers to the administrative aspects of a loan from the time the proceeds are dispersed to the borrower until the loan is paid off. Loan servicing includes sending monthly payment statements, collecting monthly payments, maintaining records of payments and balances, collecting and paying taxes and insurance , remitting funds to the note holder, and following up any delinquencies.
Who Is My Federal Loan Servicer
Currently, the federal government contracts loan servicing to nine companies and organizations, and all of these existing loan-servicing contracts are set to expire in 2019.
These servicers handle loans made through William D. Ford Federal Direct Loan Program and the Federal Family Education Loan Program, which account for the large majority of federal loans.
The federal governments loan servicers are:
You can learn more about your servicer on its own site. You can see if consumer complaints have been lodged against it at the Consumer Financial Protection Bureau , the watchdog agency tasked with educating and empowering consumers in their relationships with financial institutions. Check out the Federal Student Aid website for a full list of all student loan servicers.
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How Do I Surrender A Student Loan Servicer License Or Branch Office License Under The Sls
Licensees must notify the Department through NMLS that they intend to surrender an SLS Company license or Branch Office license. Submit any Dissolution Plan and Closing Audit documents as required per the surrender checklist through secure email at . The commissioner shall give a licensee notice of accepting a surrendered license, and a license shall not be deemed surrendered until the commissioner accepts its tender in writing.
For full details, see the CA DFPI Student Loan Servicing Company Surrender Checklist or CA DFPI Student Loan Servicing Branch Surrender Checklist.
How Long Does It Take To Process A Background Check
The time needed to complete a background check depends on where the fingerprinting process is completed. California allows live scan electronic fingerprinting within the state. Background checks using this process take less time.
See below for estimated times:
- In-state Five business days after the live scan is completed.
- Out of state Up to 60 days from the date fingerprints are received by DOJ.
- Out of country Undeterminable, time frame will vary based on the country.
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What The Change Means For You
Though the program isnt live, borrowers will find handling their loans easier with one centralized platform.
It will be a seamless system, says student loan expert Mark Kantrowitz. simply going to interact through the same 1-800 number, get automatically routed to the right servicer and then they will interact with the website, which will look the same regardless of who your servicer is.
Some growing pains are still to be expected. Its unclear what will happen to the trillions of dollars of federal student loan debt already in circulation, but its to be expected that some borrowers might have to work with multiple servicers as the transition kicks off, says Lauren Anastasio, CFP at SoFi.
Do not ignore mail that comes from a servicer that you dont currently work with, Anastasio says. Notices could contain important information about who will contact you for information about your loans going forward.
Borrowers Unaware Of Major Changes To Student Loan Forgiveness
Surprisingly, 36% of nonprofit employees said they werent aware of major changes to student loan forgiveness that now makes it easier to get your student loans cancelled. President Joe Biden, who has cancelled $11.5 billion of student loans, has continued to help student loan borrowers and announced major changes to student loan forgiveness, which relaxes rules to qualify for student loan forgiveness. . According to the new changes, student loan borrowers in the Public Service Loan Forgiveness program can count student loan payments for FFELP and Perkins Loans, late and incomplete payments, student loan payments from the wrong student loan repayment plan, and even student loan payments made prior to student loan consolidation. This week, the U.S. Department of Education announced that $2 billion of student loans will be cancelled within weeks. While the Education Department and student loan servicers should be notifying student loan borrowers about the new changes to student loan forgiveness, the survey suggests that at least a cross-section of student loan borrowers arent aware of the latest opportunities to cancel student debt. .
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What If Im Having Problems With My Federal Loan Servicer
Some loan servicers have come under fire and in the case of Navient, the nations largest servicer, faced high-profile lawsuits for allegedly improperly advising borrowers and mishandling their accounts.
You should understand your rights as a borrower, and educate yourself about your options to pay down your debt in the most manageable and cost-effective way possible. Dont just rely on your servicer to do that for you.
If you have questions or you think something just doesnt seem right, you have three main parties who can help.
When To Contact Federal Student Loan Servicing Companies
As visible from the above table, there exist several federal student loan servicing companies. You can contact them for various issues.
First, keep in mind that if it is your first year of loan disbursement, you can contact the schools financial aid professional for information. He/She can inform you about your loan status or the timing of your loans. Later, you can contact the loan servicer if you withdraw, graduate, stop studying, or study less than part-time.
In general, it is advised to maintain regular communication with the loan servicer. You also need to make yourself accessible. For example, if you change address or phone number, ensure you inform the servicer.
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What Do Loan Servicers Do
The federal government is far and away the biggest provider of student loans for students enrolled in colleges, graduate and professional schools.
All federal student loans are administered by loan servicers. If youre one of the millions who have a Direct Loan , or any other type of federal student loan, you can bank on the fact youll work with one.
In addition to billing borrowers, and collecting and processing their payments, loan servicers are tasked with helping borrowers take advantage of policies and programs offered by the DOE:
On its own, your loan servicer cant alter your loans payments or its terms. Rather, they help you make your case to your lender in this case, the government by advising you on what programs you qualify for, and processing the materials that the government requires from you to make changes.
Questions about federal loans for your current or upcoming school year should be addressed with your schools financial aid office. For your other loans, you should contact that loans servicer as soon as problems emerge. You should update your servicer right away if any of your relevant personal information changes, including your name or address.
How Do I Know Who My Student Loan Servicer Is
Your loan is assigned to a loan servicer by the U.S. Department of Education after your loan amount is first paid out.
To find your servicer, start by going to the National Student Loan Data System, which is the U.S. Department of Educations central database for student aid.
Youll need your Federal Student Aid ID number to access your information. You should have received your FSA ID when you filled out the Free Application for Federal Student Aid way back when you first applied for financial aid. If you can’t remember your info, there are password-reminder prompts in many places on the site.
The largest loan servicers currently in the space are:
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How Much Do Federal Student Loan Servicers Make Per Loan
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Borrowers often believe that student loan servicers get to keep the interest on the loan. But it doesnt work like that.
How Much Do Federal Student Loan Servicers Make?
Granite State Management And Resources Quits
Another federal loan servicer quitting this year-end is Granite State. This loan servicer deals with around 1.3 million borrowers. They announced this news when the other federal loan servicer, FedLoan Servicing, also decided to quit. Considering that the service will end during the year-end, the matter gets more complicated. Currently, federal student loans are in forbearance status due to COVID-19.
As a result, borrowers are not required to make payments till January end, 2022. However, once they start repayment, loan servicers will face massive pressure because non-repayment periods last for an extended period. At such times of confusion, another challenge will be the transfer process from quitting loan servicer to the new one.
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What Is The Examination Process
Each licensee is subject to a regulatory examination by the Department, whether or not any business has been conducted under the license. Examinations will be conducted as often as the Commissioner deems necessary and appropriate, but at least once every 36 months. The licensee is responsible for the cost, including travel expenses, of the examination. Licensees will receive a written request for information to be transmitted to the DFPI through a secure portal prior to the start of the examination.
Reservist Status In The Canadian Forces
If you are a reservist in the Canadian Forces on a designated operation you can delay repayment and interest on your student loan.
Complete the Confirmation of Posting Assignment for Full-Time Students form and submit it with your loan application to maintain your interest-free status. Make sure you attach a copy of your notification of posting instructions that you received from the Department of National Defence.
If you need help with this, contact your provincial or territorial student aid office.
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How Do Loan Transfers Happen
In some cases, the Education Department transfers your loan from one federal loan servicer to another. In this case, the ED still owns your student loan. Therefore, only the servicer who deals with the repayment is changing.
If a transfer is happening, the borrowers will be informed through email or mail. Next, the new loan servicer sends a welcome letter and provides contact details. Usually, the whole history of loan repayment is transferred to the new servicer. However, it is possible that you will see only the history after the change online. Besides, there should be no changes to your loan terms, even if the loan is transferred.
Keep in mind that till exact notification, you should continue making payments to existing loan servicers. Then follow the instructions of the new loan servicer to make payments and track them.
Start Repaying 6 Months After Leaving School
After finishing school, there is a 6-month non-repayment period. No interest accrues on your loan during this time. When this period is over you have to start making payments on your Canada Student Loan. Temporary COVID-19 relief
Contact your province for information on interest charges to your provincial loan.
The 6-month non-repayment period starts after you:
- finish your final school term
- reduce from full-time to part-time studies
- leave school or take time off school
If you need to take leave from your studies, you might qualify for Medical or Parental Leave.
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How Loan Servicing Fees Are Determined
There are two approaches to specifying how much federal student loan servicers make per loan. These are:
- Percentage basis A small percentage of the outstanding loan balance
- Unit cost basis A fixed dollar amount
Originally, federal loan servicers like Fedloan and Nelnet were paid a fixed percentage of the outstanding loan balance per year. 90 bp was typical. Since this fee is based on the loan balance, it would decrease as the loan was repaid.Today, servicers are paid a fixed dollar amount per loan each month, regardless of the loan balance. The amount of the flat fee varies, depending on whether the loan is current or delinquent.
Tens Of Millions Still Want Loan Forgiveness
Let’s be real: The administration’s debt forgiveness to date is puny compared to the total $1.7 trillion in student loan debt carried by 45 million Americans.
During his presidential campaign, Biden said he would like to cancel $10,000 in federal student loan debt for every borrower.
High-profile Democrats in Congress, including Senate Majority Leader Chuck Schumer, have urged him to go bigger and wipe out $50,000 per person.
Schumer says Congress is too divided to pass the idea in legislation and frequently argues that Biden has the executive power to enact broad forgiveness with the flick of a pen. House Speaker Nancy Pelosi has disagreed that the president has that power.
Bidens administration said in April it would review whether he could take executive action but has said nothing about the matter since. Activists and some lawmakers are demanding that Biden hurry up.
They say reducing student debt loads would benefit the U.S. economy by freeing cash that people can put toward major expenses, such as homes and cars, new business ventures, and other big investments in their futures.
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Where Are Student Loans Moving
The Department of Education decides where the loan portfolio will end up. However, Navient specifically is in negotiation with Maximus to simply transfer their existing contract over to them. Maximus has previously worked in a smaller capacity with Federal Student Aid to service collection activities.
Also, it appears MOHELA will be accepting most of FedLoan’s student loans. MOHELA has sent out communication to FedLoan borrowers to assist with the migration.
Get To Know Your Options
Federal loan servicing companies have frequently been accused of providing unsatisfactory services. Allegedly, they failed to help borrowers in need. For example, if a borrower struggles financially, they advise forbearance rather than enrolling in a more affordable repayment plan.
Others are accused of processing payments incorrectly, which leads to the loss of eligibility to forgiveness or late fees. In all cases, it is better if you do your research. Get to know forgiveness, repayment options, forbearance, deferment, and default statuses. In this way, you can ensure that your student loans are adequately treated. Do not leave the control of your loans entirely to loan servicers.
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