Student loan servicers handle billing and other services on behalf of the U.S. Department of Education, and they work directly with borrowers to assist them in repaying their student loans.
If you have federal student loans, you might have heard about some changes coming to federal student loan servicing and want to know whether any of it will impact you or your loans. Here are some things you should know.
Some Federal Student Loan Servicers Are Exiting
Three of the eight servicers recently announced that they will soon stop servicing federal direct loans. This includes FedLoan Servicing (PHEAA) and Granite State Management and Resources, or GSMR, who will stop servicing federal student loans after December 2021 when their contracts end, and Navient, which has signed an agreement with the Department of Education to transfer its accounts to another servicer.
Borrowers whose loans were assigned to one of these servicers — about 16 million people — will be transferred to another servicer designated by Federal Student Aid, the agency that administers federal student financial aid programs. Navient has transferred its contract to Maximus Federal Services, and GSMR recently announced that all of its accounts will be transferred to EdFinancial Services.
[Read: When to Contact Your Student Loan Servicer.]
Borrowers with loans serviced by PHEAA will also be transferred to another servicer designated by FSA and will receive more information from both PHEAA and FSA about their new servicer. The FedLoan Servicing contract was set to expire in December 2021, but PHEEA recently announced that it has signed a one-year contract extension until December 2022, which will allow more time to ensure that all loans are successfully transferred to other servicers.
Importantly, understand that if your servicer changes, there will be no impact on the existing terms and conditions of your loan or the loan forgiveness programs or repayment plans available to you. In addition, the temporary payment suspension and 0% interest benefits that borrowers currently receive due to the coronavirus pandemic will remain in place on your loans. That forbearance period is scheduled to expire at the end of January 2022.
Next Gen Developments
Longer term, the Department of Education 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. Those five companies are Maximus, EdFinancial, F.H. Cann & Associates, Missouri Higher Education Loan Authority and Trellis Company, formerly known as the Texas Guaranteed Student Loan Corp.
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.
[Read: Know How to Talk to Your Student Loan Servicer.]
Next Gen, which was announced by FSA 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.
FSA has begun implementing some changes, such as a new StudentAid.gov website, a virtual assistant named Aidan, and the Student Loan Simulator tool. In the future, 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 student loan servicers.
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, FSA — supported by the 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. There is no set date yet for when it will be implemented, but you can expect communications from your loan servicer and FSA to let you know.
Do I Need to Do Anything?
If you are a borrower with loans serviced by one of the three servicers exiting federal student loan servicing, look out for notices from the servicer and FSA with information about the transfer. Fully read any notices that you receive to understand who your new loan servicer will be and how to make payments.
If you’re not sure that your contact information is up to date, log in to your account at StudentAid.gov and double-check to ensure that you have provided accurate information to receive communications.
[READ: State Protections for Student Loan Borrowers — What to Know]
For all transferred loans, borrowers will be notified when the transfer is complete. When you receive information from your new servicer that explains how to establish your online account access and sign up for services like auto-debit, be sure to follow the instructions in a timely manner.
You can find general information about how student loan transfers work at this FSA webpage.
As for changes related to Next Gen, FSA plans to provide more information as the initiative progresses. In general, it’s a good idea to keep your records in order so that you can be sure to receive important communications.
Being organized is 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.
— Keep in touch with your loan servicer, especially if you have had to change your address.
— Monitor your credit report.
If you have any questions or concerns as these changes progress, you can always reach out to your loan servicer or Federal Student Aid.
More from U.S. News
Reasons to Pay Student Loan Interest During School
When, How Often to Change the Repayment Plan for Your Federal Student Loans
Federal Student Loan Servicing Changes originally appeared on usnews.com
Update 11/17/21: This article has been updated with new information.
