You’ve likely heard the phrase, “You can’t choose your family, but you can choose your friends.” While this sentiment may accurately explain your social relationships, it also applies to your student loans.
When you apply for and accept a student loan, you can choose the lender you work with. If you apply for federal student loans, that lender will likely be the Department of Education. If you look at private loans, it can be any institution that offers student loans as a financial product to customers.
But you don’t get to choose your student loan servicers. Many borrowers don’t know that a loan lender and a loan servicer can be two different entities. The institution that granted your student loans may not be the one that you make out your checks to when you start repaying them.
So what’s the difference between the two, how do you end up with both, and why, when you can choose your lender, do you not get to choose your loan servicer?
The role of a lender
In the most simple of terms, a lender is an organization that lends money. The lender will originate your student loans, set the interest rate, and designate the terms. After accepting your application, the lender will underwrite your loan and disburse the funds to you.
With federal student loans, the lender is the federal government. More specifically, that’s the Department of Education. Banks, credit unions, your school, or corporations like Sallie Mae (which is short for Student Loan Marketing Association) underwrite private student loans. The lender is legally responsible for providing certain services and notices to all borrowers, but not all lenders handle these obligations and services themselves. This is where loan servicers come into play.
The difference between lenders and student loan servicers
Lenders are institutions that allow you to borrow money, and they originate the loans for those borrowed funds. Student loan servicers are third-party companies that oversee the repayment of your loans.
In other words, student loan servicing companies act as middlemen between you and the original lender. Unlike lenders, you don’t get to choose the company that services your student loans — servicers are assigned to you based on who your lender has decided to partner with. Your servicer may also change during your repayment period, and it’s not uncommon for borrowers to have more than one different loan servicer over the life of their loan.
What is student loan servicing?
Whether you’re dealing with private or federal student loan servicing, your loan servicer manages the repayment of your debt once funds are disbursed by collecting payments, tracking due dates and minimums, and ensuring you don’t slip into delinquency or default.
Your servicer will also be your go-to resource as you repay your loans. They’re responsible for providing you with the support and information you need to make all your payments on time and in full.
If you need to change your repayment plan, work out a new payment schedule, ask for deferral or forbearance, or verify any loan forgiveness you qualify for, you can contact your loan servicer for help with any and all of the above.
How to find your loan servicer
You know your lender and servicer are not the same, but it’s sometimes difficult to know what company services your loan once funds are disbursed and you’re responsible for making payments. Your student loan servicer is responsible for helping you make your payments and should support you along the way, so knowing who services your loan and how to contact them is critical while you’re repaying your school debt.
First, go to the National Student Loan Data System for Students and navigate to the “Financial Aid Review.” Once you click the link, you’ll need to accept the terms and conditions and then log in with your FSA ID.
This will pull up an Aid Summary chart. Selecting a specific loan from the chart will allow you to access details about that loan, including the name of the company that services the loan. (Look for the “Current ED Servicer” field to find the name.)
Once you identify the company, head to their website and create an online account with them. This will help you quickly and easily access information and resources, and allow you to do things like set up autopay and check the status of your loans. Have a problem with your servicer? Learn how to resolve it here.
What to do if your student loan servicing company changes
Many borrowers will see their loan servicer change once or even multiple times while they repay their debt. This is completely normal, so don’t worry if you experience a change in loan servicer.
Should this happen to your loans, you will receive a letter or email (or both) from your assigned servicer. The new service company should also reach out when your debt transfers over to their management.
You don’t have to do anything to transfer your information; the servicer will transfer that for you. Your loan terms won’t change and you should continue making payments as normal. Be sure to set up an online account with the new company, too, so you can continue accessing the resources and services you need as you repay your student loans.
Whether you’re dealing with private or federal student loan servicing, understanding the difference between your lender and servicer is the first step. Set up any necessary accounts with your new servicer immediately, so it’s ready to go when you need it. Now you’re well on your way to managing your student loans wisely.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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.
All Annual Percentage Rates (APRs) 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 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|