This change comes after three loan service providers, Navient, Pennsylvania Higher Education Assistance Agency (PHEAA), and Granite State Management and Resources, did not renew their contracts in 2021.
As the payment pause on federal student loans is set to lift this fall, around 44% of borrowers will be facing a new loan servicer, according to the Consumer Financial Protection Bureau
The transition to new loan servicers has raised concerns about potential complications and mistakes in resuming monthly payments. Communication with borrowers during this period is crucial to ensure a smooth process. Justin Draeger, CEO and president of the National Association of Student Financial Aid Administrators, emphasized the need for careful planning and coordination, as transitioning millions of borrowers back into repayment requires thorough preparation.
Both new loan servicers faced controversies, with PHEAA accused of mismanaging the Public Service Loan Forgiveness (PSLF) program, and Navient facing allegations of illegal practices.
However, borrowers must be cautious, as when a new loan servicer is added, the chances of errors in the loan balance, interest rate, payment status, and due dates increase.
Democratic senators have also expressed concerns about the transition, especially regarding more than 7 million borrowers who have not yet been assigned to a payment plan
Instances of a lack of communication with borrowers about new loan servicer changes have been reported, which may lead to difficulties in locating or contacting borrowers before repayment resumes.
To prepare for the change, borrowers are advised to update their contact information with the Department of Education and their new loan servicer. Maintaining accurate account records is also crucial to provide evidence in case of discrepancies or disputes.
In light of the upcoming changes, borrowers are encouraged to enroll in income-driven repayment plans and consider consolidating their loans to take advantage of new plans like the Saving on a Valuable Education (SAVE) plan. Additionally, signing up for autopay with the new loan service provider can help lower interest rates and save money.
As the transition unfolds, it’s essential for borrowers to stay informed and vigilant, regularly checking their credit reports for errors after the change of a loan servicer. With effective communication and careful planning, borrowers can navigate the complexities of the new loan servicer landscape and resume their student loan repayments successfully.