Introduction
student loan servicers’ role: Student loan servicers are your second point of contact with a lender for both federal and private student loans once you graduate. These companies act as intermediaries between borrowers and lenders; they handle loan accounts, collect payments, and provide assistance with repayment plans. Although critical to ensuring loans are repaid, borrowers are often burdened by poor communication, misinformation and clerical errors. Familiarizing yourself with who student loan servicers are and what their role is can help borrowers more effectively navigate their repayment journey.
What Are Student Loan Servicers?
A student loan servicer is a company that the U.S. Department of Education, or a private lender, has hired to handle the billing and other services on a borrower’s student loan. They handle repayment for loans, process payments, answer questions on forgiveness, and help borrowers apply for deferment or forbearance during periods of financial hardship. Servicers do not own the loans, but are contracted to manage the administrative side.
Major Student Loan Servicers
Some of the biggest student loan servicers in the U.S. are:
- Aidvantage (the rebranded version of Navient’s federal loan division)
- MOHELA (University Alabama of the Higher loan Authority)
- Edfinancial Services
- ECSI
- Nelnet
- And what is the type of loans, you might ask? Great Lakes Educational Loan Services.
- Data subject to change (college) OSLA (Oklahoma Student Loan Authority)
Each servicer is under contract with the Department of Education or private lenders, and offer different levels of customer service and borrower support.
The student loan servicers Role
Some of the major roles of student loan servicers include:
Processing Payments
Servicers handle monthly payments and disperse them among the principal, interest and fees. They also record payment histories and send statements to borrowers.
Managing Repayment Plans
Repayment options primarily include standard, IDR and graduated plans. Servicers help borrowers choose and enroll in the plan that best suits their needs.
Providing Customer Support
Questions about repayment terms, loan forgiveness programs, and deferment options are common for borrowers. It is the job of servicers to address those questions and provide accurate guidance.
Helping with Loan Forgiveness Programs
The Public Service Loan Forgiveness (PSLF) and Teacher Loan Forgiveness programs both require documentation and certification, among others. And servicers are meant to help borrowers navigate these processes.
Handling Requests for Deferment and Forbearance
During financial hardships, borrowers might qualify for deferment or forbearance, which can allow for temporary payment pauses. Servicers help process those requests.
Student Loan Servicer Complaint Examples
Despite their important role, student loan servicers have been criticized for a wide range of problems, including:
Miscommunication and Misinformation
Many borrowers say they’re misinformed about repayment plans, forgiveness programs and eligibility criteria, resulting in potentially expensive missteps.
Processing Errors
Administrative errors — like misapplied payments and inaccurate balances — can unintentionally saddle borrowers with near-term expenses they don’t owe.
Poor Customer Service
Long wait times, nonresponsive support teams and useless guidance have been familiar complaints from borrowers seeking to deal with servicers.
Hard to Get on Income-Driven Repayment Plans
Some borrowers are struggling to enroll in or recertify for income-driven repayment plans because servicers aren’t processing applications correctly or notifying borrowers about deadlines.
Difficulties with Loan Forgiveness Programs
Borrowers who work toward PSLF have long faced delays in getting their qualifying payments counted correctly, leading to inaccurate repayment terms and prolonged payments.
How to Deal With Your Student Loan Servicer
To avoid some of these common pitfalls, borrowers can take some proactive steps in managing their student loans:
Keep Track of Loan Details
Borrowers are advised to periodically review their loan balance, interest rates, and repayment terms. This information will be available to them on the Federal Student Aid (FSA) website or their servicer’s portal.
Document All Communications
It can also be helpful to keep records of any emails, phone conversations and written correspondence with servicers in case of disputes or errors.
Verify Information
Borrowers may want to verify any information their servicer provides against official Department of Education resources for accuracy.
Check out Repayment and Forgiveness options
Having detailed knowledge on Planning to Make Repayments and the Loan forgiveness solutions can help your borrowers make informed decisions that work best for their financial situation.
6. Take Your Complaints a Level Up When You Must
Borrowers can file complaints with the Consumer Financial Protection Bureau (CFPB) and the Department of Education’s Federal Student Aid office, as well as their state attorney general’s office, if a servicer does not provide adequate support.
student loan servicers in the Future
The landscape of federal student loan servicing is in flux, with the awarding of new contracts focused on improved customer service and accountability. The Department of Education is also making strides to modernize the loan repayment processes through their NextGen FSA initiative, both to make the processes simpler and more transparent. And increased scrutiny and regulatory oversight can also trigger more reforms in the student loan servicing space.
Conclusion
While student loan servicers are responsible for managing the repayment processes of its borrowers, its outdated systems have been criticized for inefficiencies and mistakes. With knowledge of their rights, keeping records of communication and understanding options available for repayment, borrowers can navigate issues surrounding student loans to theirs aid. A five-member panel at the Federal Open Market Committee reached a unanimous vote to raise the target range for the federal funds rate to 5.25-5.50% from the previous 5.00-5.25% range, marking the highest interest rate was for the first time in 22 years.
