If you have borrowed federal student loans to pay for your college education, then you may already know that many of the specifics about your loan are handled by a company known as a student loan servicer. But what exactly is a servicer? What do they do? And what role do they play in helping you pay off your student loans?
Below, we answer these questions and more so that you can understand everything you need to know about servicers.
What is a student loan servicer?
A common misconception about student loan servicers is that they are your lender, but this really isn’t the case. When you borrow a federal student loan, your lender is the U.S. Department of Education. Your servicer, then, is simply a company that the Department of Education tasks with directly managing and overseeing your student loan so that they don’t have to.
In this way, you can think of a student loan servicer as something of a middleman between you (the borrower) and the Department of Education (the lender).
What does a student loan servicer do?
Student loan servicers perform a number of important duties, all of which are designed to help keep you on track in paying off your federal student loans. This includes:
- Collecting your monthly payments
- Helping you change repayment plans (if necessary)
- Helping you apply for deferment or forbearance
- Helping you understand your options for student loan forgiveness
- Answering any questions you may have about your student loan
Essentially, your servicer will play the roles typically performed by a lender (in this case, the Department of Education). If all goes well, you will never be in direct contact with the Department of Education.
What kinds of student loans do servicers handle?
Servicers handle most types of federal student loans, including:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct Parent PLUS Loans
- Direct Graduate PLUS Loans
- Direct Consolidation Loans
- Federal Stafford Loans
If you have borrowed a Federal Perkins Loan, your college or university may actually be the servicer for that loan.
Who are the servicers?
As of 2020, the federal government has empowered 11 companies to operate as federal student loan servicers. While this list may change in the future it currently includes:
- CornerStone Student Loans
- FedLoan Servicing (PHEAA)
- Granite State (GSMR)
- Great Lakes Educational Loan Services
- Navient (formerly Sallie Mae)
- OSLA Servicing
- Default Resolution Group (Maximus Federal Services)
On June 24, the U.S. Department of Education announced that it had signed contracts with five companies who would act as student loan servicers after the department’s current contracts expire. This list includes some familiar names, such as Edfinancial, MOHELA, and Maximus Federal Services. But it also includes two new companies: F.H. Cann & Associates and Texas Guaranteed Student Loan Corporation (Trellis Company).
These contracts are scheduled to go into effect between December 14, 2020 and December 14, 2021, but are very likely to see legal challenges from current servicers, including Nelnet/Great Lakes. We will continue to update this information as more becomes available.
How do I find my servicer?
If you’re unsure of who your student loan servicer is, you can find out in a couple of ways.
First, you might consider contacting your school’s Office of Financial Aid, who should be able to provide you with details about each of your student loans. If you have attended multiple colleges, you will need to contact each school separately.
Alternatively, you can log into StudentAid.gov to view details about all of your federal student loans. In order to do so, you will need an FSA ID.
Additionally, you can identify your servicer or servicers by leveraging the National Student Loan Data System (NSLDS), which holds a centralized record of all of your federal student loans. As above, you will need an FSA ID in order to use the NSLDS.
How is my student loan servicer chosen?
Your federal student loan servicer is chosen at random by the U.S. Department of Education after your student loan is disbursed. You are unable to select a preferred servicer.
Can I have more than one servicer?
While the Department of Education will often try to keep all of your student loans with a single servicer, it is not entirely uncommon for a borrower with multiple student loans to have those loans serviced by multiple servicers. This means that you can have multiple student loan servicers. Your parents, if they have borrowed Direct Parent PLUS Loans may also have a different servicer from you.
Can my servicer ever change?
Yes. Occasionally, the Department of Education may transfer your student loan from one servicer to another, for a variety of reasons. If your loan is transferred to a new servicer, the process will typically look like this:
- You may receive a letter from your current servicer notifying you that the change is happening
- You will receive a welcome letter from your new servicer, including information about any actions that you may need to take
- Your loan terms will not change
If your loan servicer changes, you should continue making payments as you normally would. Payments made to your existing servicer will be transferred to your new servicer once the transfer is completed. Once the transfer is complete, you can stop making payments to your original servicer and begin making payments to your new servicer.
Can I change my servicer?
Unfortunately, it is fairly difficult for a borrower to transfer their student loan to a new servicer on their own. If you are experiencing issues with your existing servicer, you may submit a complaint to the Department of Education or the Consumer Financial Protection Bureau (CFPB), but these very often do not result in a change.
One way to potentially transfer to a new servicer is to apply for a Direct Consolidation Loan. Because this loan is technically a new loan, once it is disbursed the Department of Education will select a new servicer for the loan. That being said, it is also possible that your servicer will remain the same even after consolidation.
If you’re tired of dealing with federal student loan servicers in general and want to exert more control over who manages your student loans, you might consider refinancing with a private lender. This will allow you to select your own lender, and give you more control over the process of repaying your debt. It will, though, effectively convert your federal student loans into private student loans, which means that you will give up certain key benefits. Therefore, it’s important to weigh the pros and cons of refinancing before you make a decision.