Student loan transfers: what to know about service changes

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About 16 million federal student loan borrowers will have new loan officers by the end of the year.

The Department of Education recently confirmed that it will not renew its contracts with the Pennsylvania Higher Education Assistance Agency (also known as FedLoan Servicing) and Granite State Management and Resources, which together manage nearly 10 million loans. . And after the Ministry of Education’s approval this week, student loan manager Navient will be leaving the loan management space and moving his 5.6 million accounts to another company.

In theory, the agent change process should be fairly transparent. However, a 2015 report from the Consumer Financial Protection Bureau recognized that the transfer service can be disruptive for borrowers, causing confusion, lost payments, surprise fees, and other costly issues. Additionally, borrower advocates fear confusion is no longer likely this year. The transition, which affects more than a third of Americans in debt, comes shortly before federal student loan repayments resume after nearly two years of forbearance.

The student loans service gets a facelift

There are several reasons why student loan managers seem to be exodusing, according to Mark Kantrowitz, student loan expert and author of the book “How to Appeal for More College Aid.” On the one hand, the direct loan program is more complex today, with multiple repayment plans, deferral and forbearance options, the pandemic era payment pause, and numerous change orders. education department. “This increases the cost of servicing federal student loans, along with all of the various due diligence requirements,” he said.

Those responsible for student loans have also come under scrutiny from policymakers and the public in recent years, after numerous reports of errors and misinformation, some of which have resulted in lawsuits.

In fact, the cancellation of management contracts coincides with the ministry’s recent announcement that it will implement “higher standards of performance, transparency and accountability for its student loan managers.” The new contract terms for 2022 are supposed to help the department’s Federal Student Aid Office (FSA) better monitor and resolve service issues. The terms describe four specific ways the department will measure how agents interact with borrowers, as well as financial incentives for agents who are successful in helping borrowers avoid falling behind on their payments.

Where borrowers’ accounts will be transferred

Navient is in negotiations with Maximus to transfer his contract and leave the field of student loan management. Maximus, who already has a contract with the Ministry of Education, manages the accounts of borrowers in default. While the department technically extended Navient’s contract until December 2023, it also approved the company’s request to stop handling loans and transfer its accounts to Maximus. The process, known as contract novation, is expected to be completed before the end of this year.

FedLoan is currently in the process of transferring some of its loans to MOHELA, an existing manager. Some accounts will also go to term with Nelnet, Edfinancial and Navient / Maximus.

Borrowers whose loans are managed by Granite State Management and Resources will have their loans transferred to Edfinancial Services.

What to do if your student loan officer changes

Jessica Ferastoaru, student loan specialist at Take Charge America, said it’s important to understand that even if a student loan is transferred from one provider to another, the terms of your loan don’t change.

“Your loan status, your repayment plan, and your interest rate all stay the same,” she said. “All that has changed is the company that will manage your loan in the future. Also, she added, if your payments have been postponed with a postponement or withholding, they should stay postponed after the duty agent is transferred.

That said, given the track record of the student loan management industry, there could be some hiccups ahead. Borrowers can take the following simple steps now to make sure the transition goes as smoothly as possible:

Keep making payments

Unless your student loan payments are postponed, be sure to continue making your payments to your current loan manager until you receive correspondence confirming that your loans have transferred. “Once the transfer is complete, it’s a good idea to contact your new loan manager as soon as possible or to confirm your next payment date and set up your payments,” Ferastoaru said.

Check your contact details

The Education Department has already started sending information to affected borrowers. To make sure you receive important updates on service changes and more, log on to the FederalAid.gov website (or create an account if you haven’t already) and make sure your information personal data are up to date in the system.

Get a copy of your loan details

While you’re signed in, Kantrowitz recommended saving a copy of your loan information now, prior to the transition. Get a list of all your loans, along with your payment history, current loan balances, interest rates, and monthly payment amounts.

Certify your public service hours

If you have applied for a civil service loan forgiveness and are served by FedLoan (which oversees the PSLF program), you must now complete an Employment Certification Form (ECF) to establish a record of the number of eligible payments. that you have done so far. . If you were recently denied a pardon, Kantrowitz said you should appeal before your agent changes.

Once your loans have officially transferred, it is important to verify that no important details have been lost during the transition. Immediately create an online account with your new servicer to verify that your loans have been transferred. You can also get a free copy of your credit reports from each of the three major credit bureaus at annualcreditreport.com and review them for missing or incorrect loan information. If you see any errors, you should contact your new repairman immediately and dispute the error with the office reporting it.

Kantrowitz also noted that if you are currently enrolled in automatic payment, where your monthly loan payments are automatically transferred from your bank account to the loan manager, you will need to re-register with the new manager. Keep in mind that many offer a small discount for doing this.

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