Millions of student loan borrowers could be making payments to a new servicer when federal student loan bills resume in September.
The government’s debt management was handled by several lenders, such as Navient, FedLoan (Pennsylvania Higher Education Assistance Agency), and Granite State. However, they ceased their services during the three-year payment pause.
During the payment pause, these three loan management companies, Navient, FedLoan (Pennsylvania Higher Education Assistance Agency), and Granite State, decided to terminate their association with the government.
Consequently, approximately 16 million student loan borrowers will be assigned to new servicing companies when payments resume or shortly thereafter. However, there are concerns about the readiness of the student loan system to handle the transition back to repayment.
The reliance on new servicers and the system’s complexity poses significant challenges in assisting millions of borrowers simultaneously. This emphasizes the need for careful attention and support.
According to the Consumer Financial Protection Bureau, a new servicer will handle the bills. Approximately 4 out of 10 student loan borrowers must pay the new servicer.
How to get details about the new student loan servicer
Scott Buchanan, the executive director of the Student Loan Servicing Alliance, mentioned that borrowers being transferred to a new servicer will receive email alerts. According to Buchanan, these notifications will provide details about any necessary actions. This will also include information about the new servicer. Kantrowitz has been monitoring the changes in loan servicing.
According to Scott Buchanan, borrowers who were previously serviced by FedLoan will undergo a transfer to MOHELA, also known as the Missouri Higher Education Loan Authority. Similarly, EdFinancial Services will now handle the accounts of borrowers previously serviced by Granite State.
For those who had their loans managed by Great Lakes Higher Education, their accounts will be transitioned to Nelnet going forward, as informed by Kantrowitz. Furthermore, Navient’s borrowers will be shifted to Maximus Federal Services/Aidvantage.
To determine their new servicer, borrowers can log in to StudentAid.gov, as suggested by Kantrowitz. This platform will provide them with the necessary information regarding the servicing transition and their updated servicer, ensuring a smooth continuation of their student loan management.
What student loan borrowers can do during changes
According to Buchanan, borrowers undergoing the servicer swap shouldn’t have to do much. The majority will only need to create an updated online account with their new company if necessary. The received communications would have already informed them about any required steps.
If borrowers were previously enrolled in automatic payments with their servicer, which typically offers an interest rate discount, they might need to reenroll, as mentioned by Kantrowitz. Ensuring the new servicer has the most up-to-date contact information is also important. This is considering the possible changes that may have occurred during the Covid pandemic.
Moreover, Kantrowitz cautioned that during a change of loan servicer, there is a possibility of encountering glitches in transferring borrower data. Therefore, student loan borrowers should be prepared for such issues to arise.
Not a New Crisis
Even before the COVID-19 pandemic, the federal student loan system faced significant issues, with experts drawing comparisons to the 2008 mortgage crisis.
In 2019, only around half of borrowers were making regular repayments, according to Kantrowitz. Over 10 million individuals, approximately 25% of borrowers, were in delinquency or default. Others sought temporary relief measures like deferments or forbearances. With the pandemic exacerbating the situation, these borrowers find themselves in an even more precarious position.
Recognizing the urgency, President Biden’s debt relief program aims to allow defaulted borrowers to regain their standing. However, the program’s outreach efforts are still in their early stages, emphasizing the critical need for effective implementation and communication.