After paying my student loans for a few years, I received a letter notifying me that my student loans were being transferred to another loan servicer. What? Whyyyy?
Even though I didn’t particularly love my student loan servicer, I had absolutely no choice in the matter and experienced very little support when my largest financial obligation switched hands in a blink. I wasn’t sure what to expect. But now that my loan servicers have changed twice, I know what to do.
If you’re in the same situation, follow these steps to transition to your new loan serving company smoothly.
What Is a Student Loan Servicer?
A loan servicer is a company that manages your student loan payments. Your loan servicer is assigned to you by the U.S. Department of Education, so you can’t “shop around” for the best loan servicer. You deal with what you’re given, for better or worse.
Currently, there are 10 student loan servicing companies that manage student loan repayment and act as a liaison between borrower and lender.
What to Do When Student Loan Servicing Changes Hands
A change in loan servicers could signify some behind-the-scenes business from your current loan servicer. It could also be a move on behalf of the Department of Education, which is making an effort to aid borrowers with more than one loan servicer by transferring their loans so they only have one servicer to deal with.
A student loan servicer change can also occur if you are participating in the Public Service Loan Forgiveness Program. All loans through that program are managed by FedLoan Servicing.
If you are unsure of who your loan servicer is, you can retrieve your federal loan information through the National Student Loan Data System. For private student loans, borrowers can check their credit reports at AnnualCreditReport.com to find out.
Step 1: Stay up-to-date by reading your notifications.
I’m the first to admit that for a long while, I collected student loan letters and emails and never read them. I’ve always made on-time payments and learned quickly that most of the notifications were simply payment reminders. However, your loan servicer will notify you months in advance about a loan servicer switch, so it’s important you actually read your notifications.
Be sure your contact information is up-to-date — you may have an old email or your parent’s address on your account. Make sure everything is up-to-date so you can stay in communication with your current loan servicer and be notified of any changes.
Step 2: Create an account with the new loan servicer.
If your loan servicer is changing, you will receive a welcome letter from your new loan servicer that includes contact information and supporting materials. Your loans will be switched over to your new loan servicer automatically, but you’ll need to create a new account with your new loan servicer in order to manage payments and stay in touch online.
Go on to your new loan servicer’s website and create an account. Typically, this involves creating a username and password, as well as entering your personal information to match you to your loans.
Once you create an account, save your password, as well as documentation about the loan transfer and the welcome letter, somewhere safe. You’ll want to have those for reference later on, if need be.
Step 3: Update your payment information.
While your loans are transferred automatically to your new student loan servicer, it doesn’t mean your payment information will be. You may need to re-input your bank information and set up your payment preferences.
You don’t want to miss a payment because autopay wasn’t set up with your new loan servicer or because you didn’t have updated payment information.
Step 4: Get to know your loan servicer.
You can’t choose your student loan servicer, so you might as well get to know the one you have. Some loan servicers like Nelnet have financial education resources and also allow for text message reminders. Learn the ins and outs of your new loan servicer so you can take advantage of what they offer.
While it may seem like your loan servicer is just a means to an end, they can be a great resource should you need to defer your loans or change your repayment plan.
What To Do If the Process Is Messy
The process of changing loan servicing companies can be relatively painless. You get a notification, create an account, update your payment settings, and voila — done.
Unfortunately, not all borrowers have the best experiences with loan servicer transfers. According to the Consumer Financial Protection Bureau:
“More than 10 million borrowers have had their servicer change in the past five years…When servicers change, payments may be lost, consumers may incur surprise late fees, and processing problems and missing account records can knock borrowers off track on repaying their loans.”
If you’re having issues with your new loan servicer and you’ve tried to resolve your issues with them directly, you may want to consider submitting a complaint with the Consumer Financial Protection Bureau.
The most important thing to do if you’re dealing with loan servicer changes is to stay on top of repayment and maintain your records.
Photo credit: joethegoatfarmer.com
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