You have no control over who services your federal student loan after you take one out. For all borrowers of federal student loans, the Department of Education selects the loan servicers.
While there are currently several federal student loan servicers, some are better known than others in terms of student loan repayment and other customer service-related matters. You may be wondering if you can move to a new loan servicer if your current one is giving you a bad taste.
Consolidating your debt, applying for Public Service Loan Forgiveness (PSLF), or refinancing your debt through a private lender are the only three ways to start a loan servicer change. To find out more about changing the servicer for your student loans, continue reading.
Why some borrowers want to switch servicers
The federal agency overseeing the whole student loan servicing and lending industry, the Consumer Financial Protection Bureau, receives thousands of complaints from borrowers each year regarding their servicers. Based on information from the CFPB complaint database, since the agency began accepting complaints in 2011, there have been close to 40,000 student loan grievances involving issues that borrowers had with their lender or servicer.
Not receiving information about repayment options and having trouble with the way payments were handled are two common complaints from borrowers. The CFPB and state attorneys general have been conducting investigations as a result of these and other complaints from borrowers. It has even prompted legal action against specific service providers for practices that regulators claim hurt debtors as they repay their obligations.
There are very few options available to you if you want to switch providers because you’re not happy with your current one. The most proactive solution is consolidation.
Choose a new servicer when you consolidate
Your current loans are combined into a single new direct loan when you consolidate your federal student loans. It’s a calculated move that can extend your loan term, which lowers your monthly payment, and make managing loan payments easier. However, if you have a longer repayment period, you will eventually pay more in interest.
You can complete a consolidation loan application at studentaid.gov. You enter the loans you want to consolidate and choose a repayment plan. Then, you can pick a new servicer or stick with the one you have. If you’re not familiar with your options, see the full list of servicers available on the Federal Student Aid website.
3 other ways your student loan servicer can change
When you apply for Public Service Loan Forgiveness, the loan management company will alter. It’s a program for borrowers of student loans who work for the government or nonprofit organizations. A ten-year payment history is required prior to requesting tax-free forgiveness.
The current servicer that processes forgiveness applications is MOHELA. Your loans will be transferred to MOHELA after you submit an Employment Certification Form and the Department of Education determines that your employment qualifies.
In order to save money, you’ll also need to make payments on an income-driven plan.
Applying for Total Disability Discharge
It is not a good idea to apply for total disability discharge in order to transfer service providers. For borrowers who are completely and permanently disabled, either physically or mentally, this is a forgiveness program. Nelnet becomes your servicer upon approval of your application because it is the only provider that oversees the discharge procedure.
When you apply for discharge, you must document your disability. For three years, Nelnet will keep an eye on your finances and disability on behalf of the federal government. If you don’t comply with the requirements during this three-year monitoring period, your loans may be reinstated.
If your loans are transferred by the Department of Education
The Department of Education may transfer your loan between servicers during the course of its duration. Both your new servicer and your current one will notify you if your loans transfer. After that, payments will be made to the new servicer.
Prior to loan transfers, borrowers should do the following:
- Get a copy of your payment history from your servicer or download it and store it from your online account.
- Add your most recent address, phone number, and email address to your contact information.
When a loan servicing transfer occurs, you will be informed, and you will handle payments with the new servicer. While all service providers offer the same choices and programs, each provider’s customer support may vary.
Loans have already traded hands in recent years. In December 2022, FedLoan transferred its portfolio to MOHELA, which included PSLF loans. After December 2021, Granite State (GSMR) and Navient ceased to provide loan servicing. Loans from Navient were moved to Aidvantage, a government contractor Maximus’ servicing division. GSMRs loans were transferred to Edfinancial. In March 2022, Great Lakes started moving its portfolio to Nelnet, and it will complete the process in October 2023.
Through at least the end of 2023, the remaining servicers, Edfinancial, MOHELA, Nelnet, and OSLA Servicing, are expected to continue servicing loans.
Alternative option: Refinance with a private lender
The sole alternative means of transferring funds is through a private lender refinancing student loans. In this instance, a bank, credit union, or online lender will consolidate all of your existing federal loans into a single new private loan.
The federal student loan servicers
Find out more about each federal loan servicer, including their capabilities and contact information.
FAQ
Can you transfer student loans to another servicer?
Both private and federal student loan servicers are capable of being transferred, but they must adhere to particular regulations in order to inform you of the changes.
Do student loans go away after 7 years?
If the loan is fully repaid, there will still be a default for seven years after the last payment date on your credit report, but there will be no balance shown. Your credit report will no longer show the default if you successfully rehabilitate your loan.
Can I choose who services my student loans?
Typically, you aren’t able to request or change your servicer. However, if you combine your loans, you can choose the servicer you want for your new consolidation loan during the application process.
How do I change my loan provider?
Refinancing and switching to a lender who services their own loans is the only way to switch mortgage servicers. Remember that a company’s ability to service a loan now does not guarantee that it will do so in the future.
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