What Is a Student Loan Servicer?
Student loans account for a large and increasing share of consumer debt, especially for younger borrowers. According to third-quarter 2018 Federal Reserve data, borrowers in the U.S. owed more than $1.5 trillion in student loan debt.
That mountain of debt is handled by student loan servicers -- the folks who collect borrowers' monthly loan payments and take care of other administrative tasks to maintain the loans.
If you have student loans, you should know who your student loan servicers are and what they can and cannot do. Learn how they can go beyond collecting payments and help you manage your loans.
What Does a Student Loan Servicer Do?
Nearly 90 percent of student loans issued in the 2017-18 school year were federal loans from the U.S. Department of Education. The remaining nonfederal loans were from states, institutions and private lenders, such as banks and credit unions.
Private lenders may administer their own student loans. For example, Sallie Mae manages its own loans rather than handing over that duty to an outside servicer, says spokesman Rick Castellano.
But the Department of Education outsources most administrative tasks to student loan servicers. In the 2018 federal budget, student loan servicers had more than $800 million in loan servicing contracts with the department.
[Read: Best Student Loan Consolidation Lenders.]
A student loan servicer oversees a loan from the time the borrower enrolls in school, through grace and repayment periods, until the borrower pays back the loan, as long as it doesn't go into default. One of the key functions of student loan servicers is to prevent borrowers from defaulting on their loans, according to the Postsecondary National Policy Institute.
Can You Choose Your Student Loan Servicer?
You can't pick your federal student loan servicer or your private loan servicer. If you've got a federal loan, the Department of Education chooses a servicer for you. With a private loan, the lender either services the loan or hires an outside company to manage it.
The servicer of a federal loan can change during the life of your loan. 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, Castellano says.
Christina Randell, president and CEO of My Education Solutions, which helps borrowers wipe out student loan debt, notes that if you consolidate your federal loans, you might end up with a new loan servicer.
When a servicer changes, you will usually receive multiple notifications, says Mark Kantrowitz, publisher and vice president of research at Savingforcollege.com. These include a letter from the old servicer before the transfer and a letter from the new servicer after the transfer.
Despite a servicer switch, the terms of your loan -- including the interest rate and the payment period -- should stay the same, says Emeka Oguh, founder and CEO of PeopleJoy, a company that enables employers to offer student loan repayment benefits to employees.
How Do You Find Out Who Your Student Loan Servicer Is?
If you have a federal loan, the loan servicer should notify you once the Department of Education has assigned it to your account. If you've got a private loan, your lender will provide loan servicing details.
To retrieve information about your federal student loan, including the name of the loan servicer, log into My Federal Student Aid or the National Student Loan Data System, Randell says. Another option: Check your credit report, which will include the name of your student loan servicer once you graduate and begin making payments.
StudentLoans.gov, operated by the Department of Education, lists the names, websites and phone numbers of student loan servicers it does business with. Those servicers include:
-- Nelnet
-- Great Lakes Educational Loan Services Inc.
-- Navient
-- FedLoan Servicing (PHEAA)
-- MOHELA
-- HESC/Edfinancial
-- CornerStone
-- Granite State (GSM&R)
-- OSLA Servicing
What Can a Student Loan Servicer Do to Help You?
While borrowers mainly interact with student loan servicers about one thing -- paying the monthly bill -- loan servicers also can help if you run into trouble. Here's how.
[Read: Best Private Student Loans.]
It can adjust your repayment plan. A standard repayment plan for a federal student loan stretches across a 10-year period. However, you might be eligible to extend the repayment period to 25 years, resulting in lower monthly payments but a higher overall cost because you're paying more interest.
You also might qualify for a plan that lets you make payments based on your income. Monthly payments would rise commensurate with your income.
"Repayment plans that are based on income need to be applied for, so borrowers have to be proactive in enrolling in repayment plans that lower their monthly payments and recertifying those repayment plans every year," Oguh says.
Some student loan servicers have come under fire for failing to support borrowers applying for income-based repayment programs that help them juggle student loan debt. For example, in 2016, some student loan servicers were cited by the Consumer Financial Protection Bureau for denying income-driven repayment plan applications that should have been approved.
In Randell's experience, some student loan borrowers experience inconsistencies and gaps in communication, including not being informed of all their repayment options. "It becomes the borrower's responsibility to ask -- and often re-ask -- about available options," Randell says.
Servicers can grant a deferment or forbearance. If you meet certain requirements, deferment or forbearance enables you to temporarily halt payments or temporarily reduce your monthly payments, according to the Department of Education.
Under a deferment, you might not have to pay interest that accumulates on certain kinds of federal loans during the deferment period. With a forbearance, you are responsible for paying the accumulated interest, no matter the type of federal loan.
Experts stress the importance of contacting your loan servicer about any difficulties you're experiencing that affect your loan payments, and about name and address changes.
"For borrowers, it is much better to talk with their student loan servicers than to hope that any problems go away. Talk on the phone, send emails or even mail letters," Oguh says.
Your servicer can provide information on loan forgiveness, cancellation or discharge. Under certain circumstances, you might qualify for forgiveness, cancellation or discharge of a federal student loan.
The Department of Education explains that forgiveness, cancellation and discharge have the same meaning -- you're no longer required to pay some or all of your loan -- but the terms apply to different situations.
Forgiveness or cancellation typically refers to no longer being required to pay your loan because of public service employment with a government agency, nonprofit group or school. When your loan is discharged and you no longer have to make payments, this may be due to a total and permanent disability or the closure of the school where you received your loan.
Kantrowitz emphasizes that changing your repayment plan; applying for deferment or forbearance; or seeking to forgive, cancel or discharge a loan is always free. "If an organization wants to charge you a fee, it is probably a scam," he warns. Rather than working with a third party, contact your student loan servicer directly to explore these options.
[Read: Best Student Loans Without a Co-Signer.]
Warning Signs a Student Loan Servicer Isn't Offering Good Service
A 2017 report from the CFPB found that 71 percent of all student loan complaints concerned student loan servicers or lenders. From July 2011 through August 2017, the bureau received more than 50,700 complaints about federal and private student loans. If you have been recently assigned or reassigned a servicer, watch out for these red flags:
-- The loan servicer repeatedly misapplies or misallocates payments.
-- The loan servicer loses paperwork you've filed to reduce payments.
-- The loan servicer steers you toward paying more than you're supposed to when you're struggling to make payments.
-- The loan servicer hides key information about repayment plans, such as the rules for recertification of an income-based payment plan.
-- The loan servicer's debt collector regularly hassles your relatives and employers about overdue payments.
-- The loan servicer's pursuit of a loan in default leads to professional licenses being revoked, making repaying the debt even harder.
What to Do if You're Unhappy With a Student Loan Servicer
If you have a problem with a student loan servicer -- you're denied a repayment plan change that should have been approved or your account inquiries are being ignored, for instance -- you can take three steps, according to Oguh:
-- File a complaint directly with the servicer.
-- File a complaint with the CFPB.
-- File a complaint with the Department of Education through the Federal Student Aid Feedback System, or if that's not sufficient, the Federal Student Aid Ombudsman Group.
Making a formal complaint with the CFPB and through the Federal Student Aid channels allows authorities to more effectively respond to your student loan servicer issues and may help them identify problematic trends.
Another option is to consolidate or refinance your loans, which can allow you to change your loan servicer. With a Direct Consolidation Loan for federal loans, you'll choose your consolidation servicer. Private student loan refinancing allows you to choose your lender and associated servicer. When you're choosing your servicer, you can read reviews and consumer complaints to find the best one for you.
