Federal Student Loan Servicing Changes
The U.S. Department of Education hires student loan servicers to handle billing and other tasks. These companies also work directly with borrowers to help them repay their student debts.
You may have heard that loan service for federal student loans is going to change. If you do, you may want to know what those changes mean for you and your loans. Know these things.
There are fewer federal loan servicers left.
Three of the eight servicers have recently said that they will no longer be taking care of government direct loans. These companies, FedLoan Servicing (PHEAA) and Granite State Management and Resources (GSMR), will no longer be responsible for managing federal student loans after their contracts end in December 2021. Navient has also agreed with the Department of Education to move its accounts to a different servicer.
A total of 16 million people whose loans were assigned to one of these servicers will have them moved to another servicer chosen by government Student Aid, the agency in charge of government student aid programs. Maximus Federal Services now has Navient’s contract, and GSMR just recently said that all of its accounts will be moved to EdFinancial Services.
People whose loans are handled by PHEAA will also be moved to a different servicer chosen by FSA. Both PHEAA and FSA will send more information to these people about their new servicer.
The FedLoan Servicing contract was supposed to end in December 2021, but PHEEA just recently said that it had signed a one-year extension that will keep the contract in effect until December 2022. This will give them more time to make sure that all loans are safely transferred to other servicers.
It’s important to know that if your servicer changes, it won’t change the terms and conditions of your loan or the loan settlement programs or payment plans you can use. Your loans will also still have the brief payment suspension and 0% interest that borrowers are currently getting because of the coronavirus pandemic. The time of tolerance is set to end at the end of January 2022.
New Things for the Next Gen
Longer term, the Department of Education has made deals with five businesses that will work directly with people who have federal student loans. These companies will help student and parent borrowers, as well as partners at postsecondary institutions, with customer service and back-office processing.
These five companies used to be called the Texas Guaranteed Student Loan Corp. and are now called Maximus, EdFinancial, F.H. Cann & Associates, Missouri Higher Education Loan Authority, and Trellis Company.
Through the Next Generation Financial Services Environment, or Next Gen, the new contracts are part of a larger plan to improve how government financial aid programs are run.
The FSA announced in 2017 that Next Gen would update the systems that handle government student loans and other forms of financial aid. Next Gen will eventually change every part of the system, from how people apply for help to how they pay back and collect on their student loans.
There are some changes being made by the FSA, like a new website called StudentAid.gov, a virtual helper named Aidan, and a tool called the Student Loan Simulator. Next Gen will eventually centralize all of the tasks involved in handling student loans on a single loan processing platform. They will also change the ways that student loan servicers are held accountable.
Next Gen wants to make the borrowing process much more uniform for people with government direct student loans. With the help of the five companies, FSA will become a one-stop shop for borrowers at every step of the financial aid process. This will save them from having to deal with multiple loan servicers.
All borrowers will move to a new servicing platform and have a new person to talk to about problems and get help under Next Gen. This change is most likely going to be the most noticeable for most loans. There isn’t a set date for when it will happen yet, but your loan servicer and the FSA will let you know.
What Should I Do?
If you have a loan with one of the three servicers that will no longer handle federal student loans, you will get notices from both the servicer and the FSA about the move. If you get a letter, read it all the way through to find out who your new loan servicer is and how to make payments.
When you’re not sure if your contact information is correct, go to your StudentAid.gov account and make sure that you have given the correct information so that you can receive messages.Borrowers will be told when the shift is complete for all loans that are being moved.
When your new servicer sends you information on how to set up online access to your account and sign up for services like auto-debit, make sure you follow the steps right away.
On this page from the FSA, you can learn general information about how to transfer student loans.
The FSA plans to give more information about changes linked to Next Gen as the project moves forward. It’s usually a good idea to keep your files organized so that you don’t miss any important messages.