November is an important time of year for student loan borrowers. Many recent college graduates’ loan payments come due this month, and as we’ve mentioned many times, making that first payment can help ensure future student loan success.
Enrolling in automatic payments is one way to ensure you pay that first bill — and each thereafter — on time. This allows your student loan servicer to deduct the amount you owe each month directly from your bank account and puts student loans out of sight and out of mind, which is exactly where many borrowers want them to be.
However, there is a problem with this set-it-and-forget-it strategy: Student loan servicers often change. If yours does, any payment arrangement you’ve set up will not carry over to your new servicer. This can put you at risk of falling behind on your payments, without you even realizing it.
[Here are five steps to take when your student loan servicer changes.]
Why Servicers Change
Lenders hire servicers to provide customer service on their behalf. This can include doing tasks like sending you your bills and collecting your payments. Student loans transfer from servicer to servicer all the time, and for a number of reasons.
For instance, the U.S. Department of Education may want to get all your loans in one place, so it’s easier for you to track them. The Department of Education may also change the contract or capacity for one of its federal servicers. This recently occurred when it ended its agreement with Aspire Resources and transferred the loans it was servicing to Mohela.
Your Rights as a Borrower
Your lender can’t simply ship your loan off in the middle of the night. If your loan is assigned, sold or transferred, you have a right to know about it if the transaction changes where you’ll send future payments.
Federal regulations require the organizations that buy and sell your loan to notify you about the changes. They can do this either jointly or separately. The notification must include the following:
[Find four ways to stay on top on an income-driven repayment plan.]
— Who the service r is, as well as telephone contact numbers
— The address to which the servicer will send your bills and communications
— The effective date of your loan’s assignment or transfer
— The date that your current servicer will stop accepting payments and the date that your new servicer will start accepting them
How Your Loans May Change
In addition to automatic payments going away, some other elements of your loan can change when your loan changes hands. For instance, your payment amount may shift slightly higher or lower as your new loan holder calculates your payoff timeframe.
However, the general terms of your loan will stay the same, including your interest rate, current repayment plan and any postponement you’re using. If you were in the middle of applying for a postponement, student loan discharge, or forgiveness, you may need to apply again. Use that contact information your new servicer sent you to find out.
[Learn ways to resolve student loan disputes.]
Handling the Situation
When your loans change hands, you can do a number of things to take control of the situation. The most important is don’t panic.
This situation occurs with many borrowers, and many times for some of them as well, as there’s no limit as to how many times a loan can be transferred or sold. If you receive a notification that indicates a change in your loan’s status, simply call the servicer you know to confirm the change.
And if you automatically debit your payments, celebrate the likely anniversary of your first payment this November by checking the National Student Loan Data System to confirm you’re sending them to your current servicer.
Once you do that, check that they have up-to-date contact information for you and remember to read every communication they send you, too. That way, your loan won’t change without your knowing about it.
More from U.S. News
A Side-by-Side Comparison of 3 Income-Based Repayment Plans
Know How to Resolve Student Loan Disputes
Discover More Methods of Student Loan Forgiveness
A Guide to Understanding Student Loan Servicer Changes originally appeared on usnews.com
