Only after you combine your student loans or file for Public Service Loan Forgiveness will you be able to switch student loan servicers.
When you initially get federal student loans, you are not given the option of selecting your servicer, which is the corporation hired by the government to administer your loans. If you combine your student loans, you will be able to choose a new student loan servicer.
Changing service providers is unnecessary if you are satisfied with your existing provider. However, if you’re having difficulties coping with it, as many borrowers do, you may want to consider switching lenders.
If you’re not sure who your loan servicer is, you may find out by logging onto StudentAid.gov and searching for it. In addition, you may reach out to all of the loan servicer contact centers by dialing 1-800-4-FED-AID (toll-free). When your loan is initially issued, the United States Department of Education assigns a servicer to you. The servicer is in charge of collecting and keeping track of the payments you make on your account. If you find yourself in a financial bind, it will assist you in enrolling in a new repayment plan and processing requests for forbearance.
The reasons why some borrowers wish to change loan servicers
Year after year, thousands of borrowers submit complaints with the Consumer Financial Protection Bureau, which is the federal agency in charge of overseeing the whole student loan servicing and lending industry. According to the Consumer Financial Protection Bureau’s complaint database, approximately 25,000 student loan grievances have been filed since the bureau began receiving complaints in 2011. The majority of these complaints highlighted concerns borrowers had with their lender or servicer.
Borrowers often express dissatisfaction with a variety of issues, including a lack of information regarding repayment choices and difficulties with the way payments were handled. The Consumer Financial Protection Bureau (CFPB) and state attorneys general have launched investigations into these and other complaints from borrowers. Some debt servicers have even been sued by borrowers because of practices that regulators claim are detrimental to the borrowers while they repay their debt.
If you are dissatisfied with your current service provider and want to switch, there are just a few options available to you. Consolidation is the most proactive option available.
When you combine your debt, you should choose a new servicer.
With federal student loan consolidation, you may consolidate all of your current student loans into a single new direct loan. It is a strategic alternative that may make it simpler to manage loan payments as well as lengthen the length of your loan term, resulting in a reduced monthly payment. With a lengthier payback term, you will, however, end up paying more in interest over time.
Studentaid.gov is the website where you may submit your consolidation loan application. You input the loan numbers for which you wish to combine and choose a payback schedule. That’s when you’ll be able to choose a new servicer or continue working with the one you now have. If you are unfamiliar with your choices, you may review the complete list of service providers accessible on the Federal Student Aid website.
There are three different ways in which your student loan servicer might change.
Applying for Loan Forgiveness via the Public Service
Making an application for a Public Service Loan The firm that oversees your debts will be forced to alter as a result of your forgiveness. It is a student loan repayment scheme for borrowers who are employed in government or nonprofit organizations. You must make payments for a total of ten years before you may ask for tax-free forgiveness.
FedLoan Servicing is the company that is now in charge of processing forgiveness applications. You will be transferred to FedLoan Servicing after you have submitted a Job Certification Form and the Department of Education has determined that your employment is qualified for debt forgiveness. FedLoan Servicing, on the other hand, will cease operations after December 2022, so if you switch now, you may anticipate your loan to be transferred to MOHELA, which will serve all borrowers seeking PSLF by the end of the calendar year.
Additionally, in order to save money, you’ll need to make payments on an income-driven schedule.
I’m submitting my application for Total Disability Discharge.
Making an application for a Total Disability Discharge is not an effective method for moving service providers. Borrowers who are completely and permanently incapacitated, either physically or mentally, are eligible for this program, which provides loan forgiveness. Due to the fact that Nelnet is the only servicer that controls the discharge process, if your application is granted, it will automatically become your service provider.
When you submit your discharge application, you must include documentation of your impairment. For a period of three years, Nelnet will monitor your financial situation and incapacity on behalf of the federal government. If you fail to satisfy the criteria of your loans throughout the three-year monitoring period, your debts may be reactivated.
If your loans are transferred by the Department of Education, you will get a new loan number.
During the course of your loan’s life, the Department of Education may transfer your loan from one loan servicer to another loan servicer. If your loans are transferred, you will be informed by both your current servicer and your new servicer of the transfer. From that point on, all payments will be sent to the new servicer.
Borrowers should take the following steps before transferring their loans:
If you have an online account, you may download and keep your payment history, or you can obtain a copy from your servicer.
Make sure your contact information is up to date with your most current mailing address, phone number, and email address, among other things.
When a loan servicing transfer occurs, you’ll be alerted, and you’ll be responsible for managing payments with the new servicer. All service providers provide the same choices and programs, but the quality of customer support varies from one provider to the next.
In addition to FedLoan’s contract coming to an end, additional loans are being traded around. Granite State Mortgage (GSMR) and Navient reached an agreement to stop servicing loans after December 2021. The loans from Navient were moved to Aidvantage, which is the loan servicing arm of Maximus, a federal contracting organization. In this transaction, Edfinancial assumed responsibility for GSMR’s debts.
Refinance with a private lender as an alternative choice.
Other than refinancing student loans with a private lender, there is no other option for transferring funds. In this situation, your existing federal debts will be consolidated into a single new private loan owned and administered by a bank, credit union, or online lender, rather than the federal government.