Student Loan Servicing Explained: The Difference Between Your Servicer and Lender

student loan servicing

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.

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