There are a lot of breaking news stories about student loans right now. One story that has flown under the radar is about Navient leaving the federal student loan servicing business. Navient’s decision itself matters because the company was a major player in the industry. But also it raises questions about where student loan servicing is headed. Additionally, when a borrower reads about these stories, they may ask, “Who is my student loan servicer? How do I contact my loan servicer? What happens if my loan servicer leaves the industry?” among other questions. This article seeks to shed light on these recent developments and questions.
What is a student loan servicer?
A student loan servicer is a company that will take care of the administration of your payments and collections of your loans. Both the federal government and private lenders will hire a loan servicer. With private companies, sometimes the loan servicer will be the same as the lender, but often it is a different company.
If your loan servicer is not your lender, then your lender will assign you a loan servicer when they send out your first installment. However, it is possible that your loan servicer will change, especially if you are going through a private lender. Sometimes private lenders quit working as loan servicers.
If you do not know who your loan servicer is, you can review your loan statements or the interface of your account under your lender to see if your loan servicer is listed there. If you cannot figure out who your loan servicer is, you can reach out to your lender for them to tell you your loan servicer and how to contact them.
Additionally, you will likely receive statements from your loan servicer, so be sure to check your email and mail for any updates. Moreover, many loan servicers will have their own online interface, and may have you make payments through there, so obviously you need your loan servicer for making payments. You need to keep your loan servicer up to date when you change your contact information, have issues making your payments, need clarification on an aspect of your loans, and any other questions or concerns you may have.
If you decide to refinance your student loans, you will also need to provide your loan servicer’s information to the new company. You will also need information from the loan servicer to allow the refinancing company to calculate the new loans.
What if my loan servicer quits?
Lately many loan servicers have stopped dealing with federal student loans, so you should be open to the possibility that yours might. If this happens, the lender will move your loan to a new servicer. At a minimum, you should receive communication from the new loan servicer that will explain that they are your new loan servicer, how to contact them, and how to make payments. Your lender and/or loan servicer will likely reach out to you about this change.
Given how much of your credit and finances are tied to making loans on time, you should do everything possible to make sure that you do not miss any payments. If you do not receive any information regarding how to make payments to your new loan servicer, you should continue to make payments with your current loan servicer. It is possible that the transition will take some time. You should also make sure to follow up with your current lender and loan servicer about when you will make payments under your new loan servicer. Similarly, if you do receive a new loan servicer, but there are any issues, contact the loan servicer.
If your loan servicer switches, your original loan terms will not change. You will just be making payments to a new company. If you worked out a change in the terms recently, or you are taking advantage of a special program, like the public service forgiveness program, make sure you speak with your servicer and that everything still lines up alright.
Finally, regardless of how much confidence you have in the transition to the new loan servicer, you should download all of your information from your current loan servicer, particularly payments that you have made, and any agreements on file.
Where does Navient come in on this?
The student loan industry is vast and complicated, and it has many different players. With this in mind, you might be wondering, “Why should I care if Navient will no longer do loan servicing? They will just be replaced by some other company, right?” Technically this is all true. But Navient’s decision does have broader implications.
First, Navient handles 5.5 million accounts for borrowers. Navient is the third loan servicing company to make the decision to no longer handle federal student loans. The other two were FedLoan Servicing and Granite State Management & Resources. Overall, these three companies accounted for 15 million borrowers.
Many feel the realities of the student loan industry have prompted Navient’s decision. First, during the Trump administration, the Department of Education had to approve new contracts for loan servicers. The Trump administration did not grant a new contract to Navient. In response, Navient made plans to move its loans to another loan servicer, Maximus. Instead of doing this, Navient could have contested the Department of Education’s decision.
However, Navient had faced negative press and attacks from members of Congress. Many observers claimed that Navient had corroborated with problematic for-profit universities and had students engage loan repayment plans that were against their interest. Navient was also known for having a difficult interface. The situation with Navient is an example of the negative press and increased scrutiny that any federal loan servicer will face. Additionally, these companies will typically only receive five to ten percent of their overall revenue from federal loan servicing.
Moreover, gaining a profit based on federal loan servicing can be difficult because the company will have to hire a lot of personnel for customer service. As mentioned earlier in this article, you will likely have to reach out to your loan servicer for an array of potential questions. Given that a loan servicer will be responsible for millions of borrowers, they need to have people on hand to answer the calls. Additionally, student loans are a risky area. Although student loans is a trillion dollar industry, it is largely based on debt, a lot of which currently seem untenable for borrowers. This has led to many policy changes, and potential ones down the road. Covid-19 brought a student loan freeze for two years and counting.
With all of this in mind, the exit of Navient, along with FedLoan Servicing and Granite State Management & Resources, are likely a sign of what is to come.
What should I do long-term?
So far this article has covered how to deal with specific situations regarding when your loan servicer switches, but there are other things you should do when dealing with loan servicers. First, be sure you know the quality of your loan servicer. It is possible that you have a poor loan servicer. You may have the opportunity to switch to a better one. Additionally, it is worth considering whether to refinance your loans. While this will likely switch your loan servicer, it is not necessarily the main reason to do it. Instead, most refinance as a way to get a better interest rate or lower monthly payments. Additionally, make sure you are educated on the status of your loans, regardless of where you are in the repayment process. Being up to date can prevent you from making any mistakes on your loans.
Todd Carney is a graduate of Harvard Law School. He holds a Bachelor’s degree in Political Science and Public Communications. He has also worked in digital media in New York City and Washington D.C. The views in his pieces are his alone and do not reflect the views of his employer.