Could Nelnet’s Purchase of Great Lakes Create a Student Loan Servicer Monopoly?


Yesterday, Nelnet announced its $150 million purchase of Great Lakes Educational Loan Services, potentially reducing the number of major student loan servicers from four to three.

“We are bringing together 90 years of industry experience, including providing outstanding service to federal and private student loan borrowers, lenders, and schools,” Jeff Noordhoek, Nelnet chief executive officer, said Thursday in a press release. Both companies will retain their separate brands, staff, and CEOs, and will compete individually for student loans.

If federal regulators approve the purchase, it will take effect on January 1, 2018. Here’s what the acquisition could mean for student loan borrowers.

How student loan servicers work

Federal student loans come from the government, but private companies handle them. Known as “student loan servicers,” they are a borrower’s point of contact. These companies are responsible for billing, payments, and customer service for the 42.3 million people with federal student loans.

Until yesterday’s announcement, there were four major student loan servicers — Nelnet, Great Lakes, Navient, FedLoan Servicing (PHEAA) — and five smaller companies.

When you take out a federal student loan, the DOE assigns you to one of the nine student loan servicers. And, though the DOE might switch your servicer at some point, you can’t initiate a transfer yourself.

In May, Secretary of Education Betsy Devos announced the Department of Education (DOE) intended to appoint a single loan servicer — a move they said would streamline the borrower experience. However, in August, the DOE shuttered that plan amidst criticism they were creating a student loan monopoly.

Student loan borrowers’ issues with current servicers

That inability to change servicers is problematic — borrowers have widely criticized student loan servicers for poor customer service.

Over the past year, the Consumer Financial Protection Bureau (CFPB) received 22,000 complaints about student loan servicers. Complaints range from having difficulty accessing income-driven repayment plans to being unnecessarily put into forbearance.

The CFPB even sued Navient in January, accusing them of “failing borrowers at every stage of repayment.”

The problem doesn’t lie solely with Navient, though, as evidenced by frustrated borrowers across the board.

And now, borrowers could be in for even more issues. One expert told MarketWatch that Nelnet’s purchase of Great Lakes means decreased competition, which could mean diminishing levels of customer service. However, another expert said he believes there aren’t so few companies that would happen yet. 

What the Nelnet/Great Lakes deal means for you

With Nelnet’s acquisition of Great Lakes, concerns about monopolies are being raised again. In a now-deleted tweet, a Bloomberg reporter posited that, if regulators approve the deal, just three companies would be responsible for more than $1 trillion of student debt.

To put that into further perspective, $1 trillion is more than 70 percent of the country’s total student loan debt.

At the moment, the experience for Nelnet and Great Lakes borrowers doesn’t seem like it will change significantly. Over time, some operations will merge, and the companies will also introduce a single servicing platform for their borrowers.

“Moving forward with the development of our state-of-the-art loan servicing platform will enable us to provide the best possible experience for borrowers as our organizations come closer together,” said Joe Popevis, president of Nelnet Diversified Solutions (NDS), the parent company of Nelnet’s servicing arm.

Details on this new platform are scant, however. Neither Nelnet nor Great Lakes immediately responded to requests for comment.

Since it’s difficult to predict whether this sale will further lower levels of customer service, you should — regardless of your servicer — make sure you stay informed.

Here are a few steps you can take.

Student loan servicers have a long way to go when it comes to informing and aiding borrowers in the repayment process. Until something changes, the best advocate you have is yourself.

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