Student loan servicers are responsible for managing billing and providing support on behalf of the U.S. Department of Education, working directly with borrowers to help them repay their student loans.
Recent updates to federal student loan servicing might affect you if you have federal student loans. Here’s what you need to know:
Servicer Exits and Transfers
Three out of the eight federal loan servicers have announced their departure from servicing federal direct loans. FedLoan Servicing (PHEAA) and Granite State Management and Resources (GSMR) will cease servicing federal loans after December 2021 when their contracts end. Navient has agreed to transfer its accounts to a new servicer.
Approximately 16 million borrowers with loans serviced by these companies will be reassigned to new servicers chosen by Federal Student Aid (FSA). Navient’s accounts will be transferred to Maximus Federal Services, while GSMR’s accounts will go to EdFinancial Services. PHEAA has extended its contract until December 2022 to ensure a smooth transition for its borrowers.
Rest assured, changes in servicers will not affect your loan’s terms, repayment plans, or loan forgiveness programs. Current benefits, such as the temporary payment suspension and 0% interest due to the pandemic, will remain until the forbearance period ends in January 2022.
Next Gen Financial Services
Looking ahead, the Department of Education has signed contracts with five companies to enhance customer service and support for federal student loan borrowers. These companies—Maximus, EdFinancial, F.H. Cann & Associates, Missouri Higher Education Loan Authority, and Trellis Company—will contribute to the Next Generation Financial Services Environment (Next Gen), which aims to modernize federal financial aid delivery.
Next Gen, launched by FSA in 2017, will transform the entire financial aid process, from application to repayment. This initiative includes updates such as a new StudentAid.gov website, a virtual assistant named Aidan, and the Student Loan Simulator tool. Future improvements will centralize loan servicing and enhance accountability metrics for servicers.
Under Next Gen, all borrowers will eventually transition to a new servicing platform, with FSA and its contractors providing a unified point of contact for support. While no specific date has been set for this transition, you will receive communication from your servicer and FSA about the changes.
What You Should Do
If your servicer is one of those exiting the federal loan servicing program, watch for notices from both your current servicer and FSA about the transfer process. Ensure your contact information is up-to-date on StudentAid.gov to receive important updates.
Once your loan has been transferred, you’ll receive instructions from your new servicer on setting up your account and managing your payments. For general information on student loan transfers, visit the FSA website.
Stay organized by creating a dedicated folder for payment records and correspondence, maintaining current contact information with your servicer, and regularly monitoring your credit report. For any questions or concerns during this transition, contact your loan servicer or Federal Student Aid for assistance.
Read More:
- 5 Essential Questions to Ask About Student Loans
- 9 Tips for Developing a Student Loan Repayment Plan
- Comparing Parent PLUS Loans and Home Equity Loans for College Funding
- Consider Refinancing Your Mortgage to Cover College Expenses
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