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When you first get federal student loans, you can’t choose your servicer — the company contracted by the government to manage your loans. But you can change student loan servicers if you consolidate.
There’s no reason to make a change if you’re fine with your current servicer. But you might want to switch if you’re having trouble dealing with it, as many borrowers do.
If you’re not sure who your loan servicer is, log in to StudentAid.gov and find out. You can also get in touch with all of the loan servicer contact centers by calling 1-800-4-FED-AID. The U.S. Department of Education assigns your servicer when your loan is first disbursed. The servicer is in charge of collecting and tracking payments you make. If you run into financial difficulty, it helps you enroll in a new repayment plan and grant requests for forbearance.
Why some borrowers want to switch servicers
Each year thousands of borrowers file complaints about their servicers to the Consumer Financial Protection Bureau, the federal regulator supervising the entire student loan servicing and lending market. Since the CFPB started accepting complaints in 2011, nearly 40,000 student loan grievances involved problems borrowers had with their lender or servicer, according to the CFPB complaint database.
Common things borrowers complain about include not getting information about repayment options and difficulty with how payments were being handled. These and other complaints by borrowers have fueled investigations by the CFPB and state attorneys general. It has even led to lawsuits against certain servicers for actions that regulators say harm borrowers as they repay their debt.
If you’re unhappy with your servicer and you want to make a switch, there are only a few ways it can happen. The most proactive solution is consolidation.
Choose a new servicer when you consolidate
By consolidating your federal student loans, you combine your existing loans into one new direct loan. It’s a strategic option that can make it easier to manage loan payments and can extend your loan term, which lowers your monthly payment. But you’ll pay more in interest over time with a longer repayment period.
You can complete a consolidation loan application at studentaid.gov. You enter the loans you want to consolidate and choose a repayment plan. That’s when you can pick a new servicer or stick with the one you have. If you’re not familiar with your options, see the full list of servicers available on the Federal Student Aid website.
3 other ways your student loan servicer can change
Applying for Public Service Loan Forgiveness
Applying for Public Service Loan Forgiveness will trigger a change in the company that manages your loans. It’s a program for student loan borrowers working in government or nonprofit positions. You make 10 years’ worth of payments before applying for tax-free forgiveness.
The current servicer that processes forgiveness applications is FedLoan Servicing. Once you submit an Employment Certification Form and the Department of Education deems your employment to be eligible, your loans will be transferred to FedLoan Servicing. However, FedLoan Servicing is going to end its servicing after December 2022, so if you switch now, you can expect your loan to eventually be transferred to MOHELA, which will service all borrowers pursuing PSLF by the end of the year.
You'll also need to make payments on an income-driven plan to save money.
Applying for Total Disability Discharge
Applying for Total Disability Discharge is not a strategy for switching servicers. It’s a forgiveness program for borrowers who cannot work due to being totally and permanently disabled, physically or mentally. Nelnet is the only servicer that manages the discharge process, so when your application is approved, it becomes your servicer.
When you apply for discharge, you must document your disability. Nelnet, on behalf of the federal government, will monitor your finances and disability for three years. Your loans could be reinstated if you don’t meet requirements during this three-year monitoring period.
If your loans are transferred by the Department of Education
Over the life of your loan the Department of Education might move your loan from one servicer to another. If your loans transfer, you’ll be notified by both your current servicer and your new one. From that point on, you’ll send payments to the new servicer.
Prior to loan transfers, borrowers should do the following:
Download and save your payment history from your online account or request a copy from your servicer.
Update your contact information with your most recent address, phone number and email address.
You’ll be notified when a loan servicing transfer happens, and you’ll manage payments with the new servicer. All servicers deliver the same options and programs, but customer service may differ from one to another.
In addition to FedLoan's contract ending, other loans are trading hands. Granite State (GSMR) and Navient concluded servicing loans after December 2021. Navient's loans were transferred to Aidvantage, the servicing arm of Maximus, a government contractor. GSMR's loans were transferred to Edfinancial. Great Lakes started the process of transferring its portfolio to Nelnet in March 2022.
The remaining servicers — Edfinancial, MOHELA, Nelnet and OSLA Servicing — are scheduled to continue servicing loans through the end of 2023.
Alternative option: Refinance with a private lender
The only other way to transfer is by refinancing student loans with a private lender. In this case your current federal loans will be combined into one new, private loan owned and managed by a bank, credit union or online lender.
The seven federal student loan servicers
Learn more about each of the federal loan servicers, including what they can do and how to contact.