The U.S. Department of Education recently announced that it has signed contracts with five companies that will work directly with federal student loan borrowers to provide direct customer service and back-office processing support for student and parent borrowers and partners at postsecondary institutions.
The new contracts are part of a broader initiative to improve the delivery of federal financial aid programs through the Next Generation Financial Services Environment, commonly known as Next Gen.
How Is Next Gen Involved With Student Loan Servicing?
Next Gen, which was announced by the Department of Education’s Federal Student Aid office in 2017, will modernize the infrastructure that delivers federal student loans and other financial aid programs. Eventually, Next Gen will change all aspects of the system, from the application for aid to student loan repayment and collection activity.
Federal Student Aid has already begun implementing some changes, such as a new StudentAid.gov website that was launched in December and consolidated three websites, streamlining the way visitors explore and apply for federal student aid. The office also added new tools such as the myStudentAid mobile app, the Annual Student Loan Acknowledgment and the Student Loan Simulator.
Next Gen is now ramping up plans to provide a more consistent and standardized experience for borrowers with federal direct student loans, which currently are handled by multiple student loan servicers — the companies that handle billing and other services — operating on four different platforms. Borrowers in repayment are assigned to one or more loan servicers, which can sometimes create confusion as they interact with different tools, branding and consumer information.
Next Gen will bring all of the operations of student loan servicing behind a centralized loan processing platform, in addition to making changes to accountability metrics for contractors.
While these changes are meant to help recipients of federal student aid, the latest announcement has left many federal student loan borrowers with questions about what changes they can expect to see and when. Here are answers to three common questions about the changes coming to student loan servicing:
— Will my student loan servicer change?
— When will the changes happen?
— Do I need to do anything?
Will My Student Loan Servicer Change?
If you have federal direct student loans, Next Gen intends to provide a much more standardized borrower experience. Instead of interacting with individual loan servicers, Federal Student Aid — supported by five contractors — will become a one-stop shop for borrowers at every step of the financial aid process.
Under Next Gen, all borrowers will transition to a new servicing platform and will have a new contact for questions and support. For most borrowers, this change likely will be the most obvious and noticeable.
If you already have federal student loans in repayment, it is likely that the contractor you interact with under the new system will be different than your current loan servicer or servicers. The five companies recently chosen to provide federal student loan servicing are Edfinancial Services, F.H. Cann & Associates, MAXIMUS Federal Services, Missouri Higher Education Loan Authority (MOHELA) and Texas Guaranteed Student Loan Corp. (Trellis Co.), according to the Department of Education.
It’s important to know that despite all the changes, there will be no impact on the terms and conditions of your student loans. And since the five contractors will no longer use their own branding, it’s possible you might not even notice this part of the shift.
When Will the Changes Happen?
It’s unclear when all these student loan servicing changes will be implemented, and one reason is that the federal contracting process is complicated. The new system will not be implemented until all components are ready to go.
In the meantime, Federal Student Aid’s contracts with the current student loan servicers will continue. When those contracts expire, they are likely to be extended until the new system is up and running, which could be next year or beyond.
Do I Need to Do Anything?
Pay attention to and read all communications from your student loan servicer and Federal Student Aid. If you receive a call from your servicer, be sure to answer or call back right away to make sure you don’t miss important notifications or updates.
In addition, if you have student loans — or any type of financial product, for that matter — it’s a good idea to keep your records in order. This is just a good practice to start and a good way to stay on top of your finances and credit. Here are some other things you can do to get yourself organized:
— Create a folder on your desktop to download and save your payment records and copies of your correspondence with your student loan servicer.
— Certify your employment if you are seeking Public Service Loan Forgiveness.
— Monitor your credit report.
— Keep in touch with your servicer, especially if you have had to change your address during the coronavirus pandemic. Updating your address will help to stay in touch without forwarding delays or not receiving mail sent to an old address.
While the exact time frame for the upcoming changes is unclear at the moment, Federal Student Aid plans to provide more information as Next Gen progresses.
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What to Know About Changes Coming to Student Loan Servicing originally appeared on usnews.com