The Department of Education announced that it is signing new contracts for the federally insured student loan program. They will not renew contracts with current student loan servicers and will have new companies take over the management of your student loans. This could mean some changes to your repayment plan, so pay attention to this update.
What Student Loan Servicers Are Changing?
In short: all of them. Great Lakes, NelNet, FedLoan, and Navient will no longer be the servicers for the federally insured student loan program.
Moving forward, the new servicers will be Edfinancial Services LLC, F.H. Cann & Associates LLC, MAXIMUS Federal Services Inc., Missouri Higher Education Loan Authority (MOHELA), and Texas Guaranteed Student Loan Corporation (Trellis Company).
“This is another major step toward our commitment to improving customer service and holding our contractors accountable for their performance,” said U.S. Secretary of Education Betsy DeVos. “Students, parents, borrowers, and schools deserve a world-class experience when dealing with FSA, and I’m confident that FSA has hired the companies with the knowledge, experience and expertise to deliver that.”
NelNet, especially, is NOT happy about this. It has said it will explore whatever avenues are available to stay involved in the program.
Why the Change?
The federal student loan program is a massively complex problem. Borrowers are frustrated with servicers mishandling of their accounts and general lack of help in dealing with their debt. Navient is likely the worst offender of them all, with 1.2 million complaints filed in 2018 alone.
This move will simplify the hyper-complex system with many different portals and interfaces to bring it under one central system. The Office of Federal Student Aid (FSA) states that it will be working to ensure new student loan servicers receive better training to handle borrower’s accounts and provide them with accurate information.
“Accountability is non-negotiable when it comes to our contractors and to FSA,” said Mark Brown, chief operating officer at Federal Student Aid. “These contracts are a vital step forward in providing our students, borrowers, their families, and partners with better experiences with our programs. We also are taking further steps to streamline FSA operations and protect taxpayer dollars.”
How Will This Affect My Student Loans?
The current servicing contracts expire in December of 2020, with six months extensions available at the Education Department’s discretion. There will likely be a transition from your current servicer(s) to the new ones.
If you currently have FedLoan, Great Lakes, or any of the other current student loan servicers, you’ll still have them for a while. Your login will likely change when these new companies fully take over. So at some point, you will likely receive an update about who your new servicer will be, as well as the new portal which you will access to view your account information and make payments.
What Should I Do to Prepare?
Regardless of how much student loan debt you have, I strongly advise you keep a separate record of everything. This includes the total amount borrowed, each loan’s interest rate, the amount of interest that has capitalized, payment history, and whatever else that reflects your account accurately.
Find this information in your current student loan servicer’s portal and save it in a separate file on your computer’s local drive. If you have multiple places to save, do that to make sure your information is protected in the event of a crash.
When your student loan servicer changes, make sure everything this new servicer has is accurate. Check the numbers they have, and if you notice any discrepancies, bring it to your servicer’s attention immediately.
I don’t know how long this process will take and what exactly the transition will look like. Based on my knowledge of the system it will be complex and time-consuming.
You may even be able to pay off your student loans before the transition is complete (especially with my guidance!), rather than ten years or more. And don’t get me started about the mess that is the Public Service Loan Forgiveness program…
As I learn more about this transition, I will share further information with you. This announcement just came out a few days ago, so there are a lot of details to be released.
Regardless of where you’re at, make as any records of what you have as possible, and if you notice discrepancies in the future, jump on it immediately to rectify that.
For further assistance paying off your student loans, schedule a free Discovery Session with me to escape them once and for all. Use the link below to set up a time that works for you so that I can assist you.
I look forward to the opportunity to serve you and your family!