According to first quarter 2023 data from the Federal Reserve Bank of New York, borrowers in the U.S. owe more than $1.6 trillion in student loan debt.
That mountain of debt is handled by student loan servicers – companies that manage billing and other administrative tasks necessary to maintain these loans.
While borrowers don’t have to pay extra for what student loan servicers provide, it helps to know which company services your loan and the different ways they can assist you throughout the life of your loan. Having this information can help you get the most out of your loan-servicer relationship.
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What Do Student Loan Servicers Do?
Student loan servicers handle the day-to-day upkeep of student loan accounts. It’s not a small task, either. Some common tasks that servicers manage include:
- Payment processing.
- Issuing monthly statements.
- Managing customer service inquiries.
- Keeping accurate loan records.
- Handling loans in accordance with applicable laws.
- Processing deferments, forbearances and payment plan changes.
Basically, your student loan servicer is your go-to for your loan once funds have been disbursed.
How Can Your Student Loan Servicer Help You?
If you’re having trouble making payments, you may be able to get help by talking to your loan servicer. Loan servicers may help you work through payment plan options, forbearance or deferment periods or, in some cases, loan forgiveness, cancellation or discharge.
Payment Plan Adjustments
If you have federal student loans, your servicer can explain the payment plans available to you and help you secure a plan that works for you. Repayment plans available to those with federal student loans include:
- Standard repayment plan: Fixed monthly payments to repay your loan in a 10-year term or a 10- to 30-year term with consolidation loans.
- Graduated repayment plan: Payments typically increase every two years such that you pay off your loans within 10 years, or within 10 to 30 years with consolidation loans.
- Extended repayment plan: Borrowers with more than $30,000 in direct loans can use this plan to pay off their balance within 25 years.
- Income-driven repayment plans: Typically tie your payments to a percent of your discretionary income. You should also use an IDR plan if you are planning to seek student loan forgiveness.
If you have private loans, your repayment plan options will vary by lender. For instance, Sallie Mae offers a Graduated Repayment Period that allows eligible borrowers to make interest-only payments for 12 months.
If you want to request a change to your private loan’s repayment plan, the Consumer Financial Protection Bureau advises gathering evidence for your private student loan servicer to review. Bank statements, a budget and payment information for your other bills can be useful.
Deferments and Forbearances
If you’re having trouble making your federal student loan payments, you may want to request a deferment or forbearance, which could allow you to temporarily stop or reduce your payments. Your loan servicer can help with both.
Under a deferment, you might not have to pay interest that accumulates during the deferment period. With a forbearance, you are responsible for paying the accumulated interest, no matter the type of federal loan.
If you have private student loans, your deferment and forbearance options will depend on your loan servicer.
But regardless of your loan type, it’s a good idea to contact your loan servicer as soon as possible about any difficulties you’re experiencing that affect your loan payments.
Loan Forgiveness, Cancellation or Discharge
Under certain circumstances, you might qualify for forgiveness, cancellation or discharge. Your loan servicer can help you explore whether you qualify.
According to the Department of Education, federal loan forgiveness, cancellation and discharge all lead to the same outcome: You’re no longer required to pay your loans. However, these terms apply to different situations.
Forgiveness or cancellation typically refers to situations when you are no longer required to pay your loan because you completed certain work requirements. President Joe Biden’s loan forgiveness plan is currently in the hands of the Supreme Court.
Loan discharge means you no longer have to make payments as a result of circumstances including a total and permanent disability or the closure of the school where you received your loan.
Can Your Student Loan Servicer Change?
You generally can’t pick your loan servicer. If you have a federal loan, the Department of Education assigns your servicer. For private student loans, lenders either service the loans themselves or outsource servicing to another company.
But both federal and private student loans can undergo a servicer change, under certain circumstances.
Changes to Your Federal Student Loan Servicer
If the Department of Education transfers your student loans to a different loan servicing company, you’ll receive communication from both the Department of Education and your new servicer.
Always open and read any letters or emails you receive about your loan in case the Department of Education is notifying you of a transfer to a different servicer, says Rick Castellano, vice president of corporate communications at Sallie Mae.
Communications will include a letter, email or both that explain the transfer notice and include information about your new student loan servicer. Your new servicer will reach out once your loans have been transferred and then be your point of contact going forward.
Your original federal student loan terms won’t change if the Department of Education transfers your loan to a new servicer, says Cindy Dehls, vice president of student lending at PNC Bank. “The interest rate and repayment options will be honored and will not be adjusted or altered due to a change in servicer,” Dehls says. However, you may need to set up an online account with your new servicer to get payments going again.
If you opt to refinance your federal student loans, your loan servicer will be the company with which you refinance or the servicer that company uses. However, refinancing converts a federal loan to a private loan, and you will lose access to federal benefits and loan forgiveness options.
Finally, you can select your federal student loan servicer during consolidation. When consolidating multiple federal student loans, you can select your new loan servicer on your consolidation application
Changes to Your Private Student Loan Servicer
You typically can’t change your servicer for private student loans unless you refinance.
When you refinance student loans, you can compare lenders and rates. When you find a lender with rates and terms you like, you’ll apply for the loan and qualify based on your creditworthiness and other factors. Once you’re approved, the new lender will pay off your existing student loans.
How Do You Find Out Who Your Student Loan Servicer Is?
If you can’t locate or remember who your servicer is for a federal student loan, you can visit the account dashboard of your Federal Student Aid account. From there, go to the “my loan servicers” section to find your servicer for each federal student loan. You can also get servicer information by calling the Federal Student Aid Information Center at 800-433-3243
Finally, for both federal and private student loans, you can check your credit report. Once you graduate and start making payments, your credit report will include the name of your student loan servicer.
If you know your federal loan servicer but don’t know how to contact them, you can visit the Department of Education’s website and find contact information for all approved federal student loan servicing companies. Those servicers include:
- OSLA Servicing.
- Central Research Inc.
- Default Resolution Group.
Warning Signs a Student Loan Servicer Isn’t Offering Good Service
According to a report from the CFPB, complaints about both private and federal student loans increased significantly between September 1, 2021, and August 31, 2022. The largest volume of those complaints – 66% – concerned borrowers who experienced issues with their lenders or servicers.
Some of the most commonly reported issues borrowers experienced include:
- Inability to access flexible repayment options.
- Issues with lowering monthly payments.
- Receiving bad information about loans.
- Customer service issues.
- Problems with payment handling.
If you feel you’re not receiving good service from your current loan servicer, those with private loans could refinance away from the troublesome servicer. Those with federal loans could also consolidate and use the ability to select their servicer to potentially alleviate issues.
What to Do if You’re Unhappy With a Student Loan Servicer
If you have a problem with your loan servicer that can’t be resolved through refinancing or consolidation, you have recourse. First, you can file a complaint directly with your loan servicer. If that doesn’t yield a favorable outcome, there are additional steps you can take depending on your loan type.
For complaints about federal student loan servicers, you can log into your FSA account and use the “submit a complaint” option. It’s possible to submit a complaint without logging in, but this may delay review of your complaint, according to the National Consumer Law Center.