Student loan servicer Navient extended its federal contract with the Department of Education through 2023, despite previously announcing on Sept. 28 its intention to exit the federal student loan business.
The contract renewal was posted on SAM.gov, a website that hosts data about government contracts.
The two-year contract extension comes with a $391 million price tag, according to the renewal document. Navient will be responsible for managing "student aid obligations, including, but not limited to, servicing, specialty programs, and consolidation of outstanding debt" until Sept. 14, 2023.
The 6 million student loan borrowers whose federal loans are serviced by Navient will eventually be transferred to a new servicer, Maximus, subject to the Education Department's approval, Navient said prior to its contract renewal. But Navient isn't the only student loan company that plans to end its federal contract.
Two other loan servicers, FedLoan Servicing and Granite State Management & Resources, announced in July that they were not renewing their federal contracts that expire at the end of the year, in a move that will impact 10 million borrowers.
The office of Federal Student Aid (FSA) is working to reduce confusion as millions of borrowers are transferred to a new loan servicer around the same time that federal student loan payments are set to resume in a few short months.
FSA Chief Operating Officer Richard Cordray said in a statement that "FSA will provide strong oversight and hold servicers accountable for making sure borrowers are supported and not harmed during this transition."
If you're one of the 16 million student loan borrowers whose federal loans are serviced by Navient, FedLoan Servicing or Granite State Management, your loans will automatically be reassigned to a new servicer. Your student loan repayment terms — including the interest rate, payoff date and loan amount — will remain the same.
Keep reading for tips on how you can prepare for the upcoming transition. Plus, learn what you can do if you're not happy with your current federal student loan repayment terms, such as student loan refinancing. You can compare student loan refinance rates without impacting your credit score on Credible.
3 things to do now if your student loan servicer is changing
You don't need to take any action if your student loan servicer is shutting down. The Education Department will handle the transition to a new servicer, and your loans will automatically be reassigned. Still, there are a few things you can do now to prepare, especially as the COVID-19 payment pause – which runs through January 2022 – comes to an end:
- Make sure your contact info is up-to-date on the FSA website. This way, you don't miss any important communications about your new loan servicer.
- See if you're enrolled in automatic payments. If you have autopay set up for your federal student loans, then your next student loan payment will be deducted from your account in February 2022.
- Review your current student loan repayment terms. Take a look at your interest rate, loan amount and monthly payments so you can start planning your debt payoff.
By getting your information in order now, you can expect a smooth transition when your servicer changes and your payments resume.
What to do if you're not happy with your student loan repayment plan
When your loans are assigned to a new student loan servicer and the federal administrative forbearance period expires, you'll be responsible for repaying your student loans with the same repayment terms you had before. Your monthly payment, interest rate and loan amount will remain unchanged.
But if you're not happy with your previous loan repayment plan, you have options for lowering your monthly payments and paying off your loans faster. Here's how.
Refinance to a lower interest rate
Private student loan refinancing is when you take out a new student loan with better terms to repay your current loans. By refinancing to a lower interest rate, you may be able to reduce your monthly student loan payments or pay off your debt faster.
Student loan borrowers who refinanced to a shorter-term loan on Credible were able to save nearly $17,000 on average and pay off their loans 41 months faster, according to a Credible analysis. Those who refinanced to a longer-term loan were able to cut their monthly payments by more than $250 on average, all without adding to the total interest paid.
While private student loan refinancing may be able to get you a lower rate on your student loan debt, it's important to note that refinancing your federal student loans would make you ineligible for certain resources like income-driven repayment and student loan forgiveness programs.
You can browse student loan refinancing rates in the table below, and see your estimated rate by getting prequalified on Credible. Once you have a good idea of the rates you qualify for, use a student loan calculator to see if refinancing is right for you.
Enroll in an income-driven repayment plan
The federal government offers a few debt relief options for borrowers who are struggling to repay their student loans, including income-driven repayment (IDR). IDR plans limit your monthly student loan payments to 10-20% of your disposable income, depending on the type of loan you have.
You can enroll by signing into your account on the FSA website.
Apply for additional federal forbearance
The COVID-19 administrative forbearance period was extended through the end of January 2022, but many borrowers say they will be unable to resume payments. If this sounds like you, consider applying for economic hardship deferment or unemployment deferment. Pending FSA approval, you may be eligible to have your student loan payments paused for up to 36 additional months.
To learn more about student loan repayment options, get in touch with a loan officer at Credible who has a deep understanding of the needs of student borrowers.
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