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Your student loan service center may change soon. You are ready?
By the end of this year, nearly 10 million federal student loan borrowers will be transferred to the new service company after two student loan servicing companies – FedLoan Servicing and Granite State Management and Resources – decided not to renew their contracts with the Department of Education (DOE).
Borrowers affected by the transition may be concerned about what this will mean for their balances or progress towards loan forgiveness. But some experts say panic is not the way to go, but proactive, since in most cases borrowers have no say in who ultimately serves their loans.
Here’s what you need to know.
Why are some student loans being transferred to new service organizations?
The DOE contracts with companies to manage and service federal student loans. These companies are responsible for billing, managing and collecting loan payments. Today there are nine federal student loan services. according to Federal Student Aid (FSA), Department of Education office…
But soon there will be only seven of them. FedLoan Servicing and Granite State Management and Resources have decided not to renew their contracts with the DOE. Both contracts will expire by the end of this year – just a few months after the termination of the federal student loan. scheduled for the end of September 30… This means that millions of borrowers will begin repayments during the transition of service personnel, resulting in student loan Borrower supporters are wary of how they will be treated administratively.
Two service providers manage student loans of 10 million borrowers. FedLoan Servicing is the service provider in charge of borrowers at PUblic service loan forgiveness (PSLF), under which borrowers with 10 years of public service and 120 related monthly payments are eligible for loan forgiveness.
So why call it a cessation?
The Pennsylvania Higher Education Support Agency (PHEAA), which serves federal student loans called FedLoan, said in a statement that managing federal student loans has become more complex and costly since it first contracted with the US Department of Energy 12 years ago.
A not-for-profit network of the New Hampshire Higher Education Association Foundation (NHHEAF) serving federal student loans called Granite State Management and Resources. stated that he would not renew his contract focus more on government services in New Hampshire and private student loan products.
Should borrowers worry about switching to student loan service?
Some reports of service companies not renewing their contracts have taken on a dramatic tinge, questioning how smooth – or not – the loan operator’s transition will be. There is also an additional layer of service for FedLoan borrowers seeking PSLF, which requires 120 matching payments over 10 years to be eligible for forgiveness.
Will the transition be chaos? Will payments and borrower information be lost during the transition?
One expert doesn’t think so.
“Don’t worry,” says Betsy Mayotte, president of the Institute of Student Loan Advisers. “Service staff transfers happen. In 99.99% of cases, everything goes well. “
Legislators are also overseeing the transition. Senator Elizabeth Warren (MD), who has sharply criticized the student loan system, told a Forbes adviser that she “insists on strict oversight to ensure that borrowers are protected during this transition period.” She also sees these changes in the service department as a chance to reform the system as a whole.
“The changes to how student loans are serviced represent a great opportunity to fix the system to serve borrowers and not large corporations,” Warren said in a statement. “This includes increased accountability in future service contracts with the Department of Education.”
Mayotte adds that millions of borrowers were to be transferred to the new service company as part of a Department of Energy initiative to simplify the federal student loan system. Under the initiative called Next Generation Financial Services Environment (Next Gen), only five companies will handle student loan and customer service.
How to Prepare for Switching to Student Loan Service
And while Mayotte is optimistic about the transfer of service, it is important for consumers to remain diligent in the process. According to analysis released in October by the Student Borrower Advocacy Center and the American Federation of Teachers.
Rather than panic, borrowers affected by the shift in service personnel can now take steps to prepare for the transition. Above all, however, Mayotte advises borrowers to be patient in the process and adds that some service companies include periods of abstinence after the transition to help borrowers adjust.
In the meantime, being organized and proactive will go a long way. The Consumer Financial Protection Bureau (CFPB), a federal oversight agency, provided a Forbes advisor with the following tips on how to prepare for the student loan support transition:
- Make sure your contact information is up to date with your current service center. “Regardless of whether you paid off the loan before the pandemic or this is your first time, log into your current maintenance staff website and update your contact information,” says a CFPB spokesman. “That way, you will be alerted when a transmission occurs.”
- Open any email or email messages from your service staff. Some service centers will send mail or email notifications that your loan will be transferred to a new service center. The CFPB advises borrowers to open any form of communication to keep abreast of what is happening with your loan.
- Save copies of your payment history. “Just in case, print or save in PDF format any documents or statements on your current service portal,” says a CFPB spokesman.
“Having a copy of your account information is a great way to ensure that your information is correct after the transfer is complete.”
- Beware of scams. Warning signs of student loan fraud include requests for information about your federal student aid, coercion into advance payments, and individuals claiming to be associated with the Department of Education or your current student loan service agent. If you suspect that the company is contacting you, please contact your current support staff. ” You can find more tips for detecting fraud through CFPB Fraud and Fraud Page…
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