How to Change Your Student Loan Servicer

A student loan servicer is a company that manages the administrative aspects of your student loans, acting on behalf of the original lender. For federal student loans, the U.S. Department of Education assigns a servicer to handle tasks like processing payments, responding to inquiries, and assisting with repayment options. Private student loan servicers are typically chosen by the private lender. Borrowers generally cannot directly choose or switch their student loan servicer. However, specific processes and circumstances can lead to a change.

How Federal Loan Servicers Can Change

Federal student loan borrowers seeking a change in their servicer often utilize the Direct Loan Consolidation program. This process allows you to combine multiple federal education loans into a single new loan, managed by one servicer. When applying for a Direct Consolidation Loan, borrowers can select a new loan servicer from a list of approved providers. The new consolidated loan’s interest rate is fixed, calculated as the weighted average of the consolidated loans’ rates, rounded up to the nearest one-eighth of a percentage point.

Before beginning the consolidation application, borrowers should gather specific information. This includes details about current federal loans, such as existing servicers, balances, and interest rates. Personal information, including contact details, and financial information for income-driven repayment plan selection are also necessary. The Federal Direct Consolidation Loan Application and Promissory Note is available online through StudentAid.gov.

Once all required information is entered, the submission process is straightforward. Borrowers submit their application electronically via the StudentAid.gov portal. After submission, a confirmation is provided, and the application enters a processing phase, which can take several weeks. The chosen servicer will then communicate with the borrower regarding the new loan’s status and management.

How Private Loan Servicers Can Change

For private student loan borrowers, the primary method to change servicers is through refinancing. Refinancing involves taking out a new private loan to pay off existing private student loans. This replaces your old loan(s) with a new one, often resulting in a new lender and servicer. The goal of refinancing is to secure a lower interest rate, reduce monthly payments, or simplify repayment by combining multiple loans.

Preparing for a private loan refinancing application involves gathering documents and financial information. Borrowers need current loan details, including balances, interest rates, and repayment terms for all loans they intend to refinance. Lenders require financial information such as income verification (e.g., pay stubs, tax returns), employment history, and may assess creditworthiness, often requiring a good credit score. Compare offers from various private lenders to find the most favorable terms, considering interest rates, fees, and repayment options.

Submission of a private refinancing application occurs online through the chosen lender’s website. This process involves an initial application that might include a soft credit check, followed by a hard credit check if the borrower proceeds. Borrowers submit supporting documentation electronically or by mail, such as proof of income, identification, and current loan statements. After submission, the lender reviews the application, approves it, and then disburses new loan funds to pay off old loans, initiating the relationship with the new servicer.

Servicer Changes Beyond Borrower Control

Student loan servicers can change for administrative reasons not initiated by the borrower. These changes occur due to factors such as the U.S. Department of Education ending or reassigning contracts with federal loan servicers. Mergers, acquisitions, or sales of loan portfolios between private lenders can also lead to an automatic servicer change for private loans. In these situations, the borrower cannot choose the new servicer; the transfer is a decision made by the loan holder or servicer.

When an administrative transfer happens, borrowers are notified by both their current and new servicers. These notifications arrive via email or postal mail and provide details about the upcoming change, including the new servicer’s name and contact information. Loan terms, including interest rates and repayment plans, remain the same when an administrative transfer occurs.

Managing Your Account After a Servicer Change

After a student loan servicer change, regardless of how it occurred, borrowers should take several proactive steps to ensure a smooth transition. Confirming the new servicer’s identity and contact information is a primary step, often found in the welcome letter or by checking StudentAid.gov for federal loans. Update any contact information, such as your mailing address, phone number, and email, directly with the new servicer.

Verifying the accuracy of your loan details with the new servicer is also important. This includes confirming the loan balance, interest rate, and current repayment plan. If you had auto-pay set up with your previous servicer, you will need to establish new payment methods or re-enroll in auto-pay with the new servicer. Before the account fully transitions or closes with the old servicer, download and save past payment history and statements for your records. Monitoring your credit report after a servicer change can help ensure the transition is reported accurately and does not negatively impact your credit standing.