If you’re a federal student loan borrower, you might suddenly find your loan servicer has changed without your direct knowledge. Recently, many borrowers have experienced their loans being transferred to new servicing companies, sometimes with little to no advance notice. Understanding what this means and how to navigate the transition is crucial to maintaining control over your student loans and avoiding potential missteps.
Why Are Servicers Changing Without Notice?
The U.S. Department of Education (ED) contracts various servicers to manage its $1.6 trillion portfolio of federal student loans across approximately 42 million borrowers. Companies like Nelnet, Mohela, EdFinancial, and recently Central Research Inc. (CRI) administer these accounts. From time to time, the ED reassigns loans between servicers—something that can happen quietly and catch borrowers off guard.
For example, some borrowers recently discovered that their loans moved from their longtime servicer, Nelnet, to CRI, often learning of the change only after receiving unexpected emails or finding notices buried in account inboxes they rarely check.
What Happens During a Loan Servicing Transfer?
During a transfer, it’s common for borrowers’ loans to be placed into what’s called an administrative forbearance—a temporary pause on mandatory monthly payments while the new servicer sets up the account. This forbearance typically lasts up to 60 days.
While in administrative forbearance:
- Interest continues to accrue on your loans, increasing your overall balance.
- Payments may not be accepted by either the old or new servicer.
- Borrowers are not reported as delinquent during this period.
- Eligibility for forgiveness programs usually remains intact.
Due to this limbo status, borrowers need to be cautious. Making payments during the transfer could risk misapplication or lost payments, while skipping payments allows interest to grow.
How to Prepare and Respond if Your Loan Servicer Changes
If you receive notice that your loan servicer is changing or suspect it might have, here are practical steps you can take:
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Stay Vigilant for Communications: Check all channels for notices—including email, your online servicer account inbox, or postal mail. Sometimes announcements are buried in messages you might overlook.
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Save Critical Loan Information: Before and after the transfer, screenshot or download essential account details such as loan balances, interest rates, payment history, current payment status, and any communications. These documents are your record if errors arise.
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Confirm Your Loan Details: Once the new servicer sets up your account, verify that your loan balances, interest rates, payment amounts, and contact information are accurate and match your prior records.
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Manage Payments Carefully: During administrative forbearance, consider setting aside your usual monthly payment amount but avoid submitting payments until your new account is fully active to prevent lost payments. Afterward, resume payments as scheduled.
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Re-Authorize Automatic Payments: If you had autopay with your previous servicer, you’ll likely need to re-enroll with the new servicer to continue receiving any interest rate discounts.
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Monitor Your Credit: Check your credit reports after the transition to ensure no missed payments or errors were reported during the servicing change.
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Know Who to Contact: Keep a list of federal loan servicers and their contact information handy, available at official sites like studentaid.gov, to quickly reach out with questions or concerns.
Why This Matters
Although loan transfers are administrative—meant to better manage the federal student loan system—errors and confusion can happen. In worst cases, overlooked notifications or misapplied payments can affect your credit or eligibility for certain programs. Being proactive, organized, and informed can safeguard your financial wellbeing.
Final Thoughts
Unexpected student loan servicer changes are becoming more common as the Department of Education refreshes contracts and adds new servicers. While these shifts might feel unsettling, borrowers who stay alert, keep thorough records, and closely monitor their accounts can navigate the process with minimal disruption. If you find yourself caught in such a transfer, remember: verify information, hold off on payments until accounts are active, and keep communication lines open with your new servicer.
Staying informed and prepared is your best defense against surprises in the evolving landscape of student loans.
