What to do if your student loan servicer changes

If your loan servicer changes, you should receive plenty of notice before the change goes into effect.

Zina Kumok

By 

Zina Kumok

Zina Kumok

Contributing Writer

Zina Kumok is a contributing writer specializing in personal finance.

Published February 9, 2022 | 4 min read

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Almost 10 million borrowers will have their accounts transferred to a new student loan servicer by the end of the year. 

The Department of Education’s Federal Student Aid office is creating a stricter set of standards for student loan providers. The change is meant to help borrowers make payments when the student loan pause lifts in May. Another reason student loan servicers are changing is because it’s difficult and expensive for companies to process federal loans, says Travis Hornsby, founder of Student Loan Planner

This shouldn't affect the repayment process in any significant way. Your loans are guaranteed to have the same rate and terms after being transferred to the new servicer. 

Where your loans are transferred to depends on who your provider is and the type of loan you have. For example, borrowers working toward Public Service Loan Forgiveness (PSLF) will have their federal loans moved to the Missouri Higher Education Loan Authority (MOHELA), while borrowers with Navient will now have Aidvantage as their loan servicer. Borrowers with FedLoan Servicing will also have their loans transferred to MOHELA, Aidvantage, Edfinancial or Nelnet.

The only potential issue is that information can sometimes be transferred incorrectly between student loan providers. Here's how to make sure that doesn't happen, and what else you should know about upcoming changes to your federal student loans.

Transfer your information

If your loan servicer changes, you should receive plenty of notice before the change goes into effect. If you haven’t heard anything from the new servicer, you may need to update your contact information on your Federal Student Aid account. 

Hornsby recommends using the official StudentAid.gov website instead of the loan servicer website when making changes to their student loans. Log onto your account and update your email, phone number, and mailing address to make sure it’s correct. You can also contact the new servicer’s customer service department personally and make sure they have your information.

Hornsby says loan servicers have historically not always given accurate advice to borrowers, especially regarding repayment plans and deferment and forbearance programs. You can do almost anything you need through the official Student Aid website without going through the loan servicer, he says. 

“If you do have questions, contact your servicer but know that you’re going to have to look out for your interests,” Hornsby says. “Don’t trust that your servicer is going to give you impartial information.”

If your loans have already moved over to the new servicer, consider signing up for automatic payments. This will ensure that you never miss a payment and incur late fees, and you’ll also qualify for a 0.25% interest rate discount. You can also sign up for an income-driven repayment plan or change your autopay status. 

Look out for loan changes

In December 2021, President Biden announced another extension of the COVID-19 forbearance period. Borrowers with federal loans will not have to make payments until May 1, 2022. During this time, the 0% interest rate will still apply. 

Many experts thought the government would not offer an extension, so this caught many borrowers by surprise. Whether or not the government offers another extension is still up in the air and may be a last-minute decision. Hornsby says the decision will likely come down to the number of COVID-19 cases. If cases increase, he believes there will be another extension. If cases decrease, he thinks the forbearance period will end.

Consider refinancing 

Borrowers with federal loans who want to pay less interest can refinance their student loans with a new lender. Let’s say you owe $40,000 with a 10-year term and an 11% interest rate. If you refinance to a 10-year term and a 5% interest rate, you could save $15,209 in total interest over the life of the loan.

Interest rates are still very low right now, but the Federal Reserve has indicated that it will raise interest rates as soon as March. 

“If interest rates rise between now and May 1, you could pay a lot more interest over a 10-year period by not refinancing now,” says Erik Kroll, a certified financial planner and founder of Student Loans Over 50.

Make sure you understand the downsides of refinancing as well. Refinancing will convert your federal loans into private student loans, which involves giving up all benefits and protections like loan forgiveness options, income-driven repayment plans, and longer deferment programs. If you’re working toward PSLF or another kind of loan forgiveness program, refinancing would cause you to lose forgiveness eligibility. Bottom line: You may not want to refinance if you're not sure you can afford the new terms.

“If you have debt that’s 1.5 times your income, don’t refinance,” says Hornsby. “It’s not likely going to be a good idea.”

Image: Artem Varnitsin / Getty