Two student loan servicers are dropping their federal contracts at the end of 2021 in a move that will impact nearly 10 million borrowers.
The Pennsylvania Higher Education Assistance Agency (PHEAA), which operates as FedLoan Servicing, and Granite State Management & Resources announced in July that they would not be renewing their federal loan servicing contracts.
Keep reading to find out what you need to do if your student loan servicer is shutting down and how you can prepare for the transition.
Also, consider your alternative debt repayment options, such as student loan refinancing. If you decide to refinance your student loans, visit Credible to compare interest rates across multiple private lenders at once without impacting your credit score.
How to switch student loan servicers
Thankfully, the Department of Education will automatically reassign loans that are serviced through FedLoan Servicing or Granite State. The office of Federal Student Aid (FSA) is working to reduce confusion and improve communication so that borrowers know what to expect as they transition to a new loan servicer this December.
If you're impacted, you do not need to take any action to switch loan servicers. Your loan repayment plan, including your interest rate and monthly payments, will remain the same with your new servicer.
Not happy with your current repayment terms? Consider refinancing your student loans while rates are near historic lows. You may be able to get a lower interest rate, pay off your debt faster and lower your monthly payments. Student loan refinancing can save you money over the life of the loan, too, thanks to lower rates. You can compare student loan refinance rates in the table below and see estimated interest rates tailored to you on Credible.
3 things to do if your loan servicer has dropped you
Although your student loans will automatically be switched to a new loan servicer, there are still a few things you can do to make sure you're well-informed during the transition. Here are a few tips to help you prepare for when your servicer changes — and when student loan payments resume in February 2022.
1. Make sure your contact info is up-to-date
Reach out to your current loan servicer to ensure they have your correct contact information, including your physical address, email address, and phone number. Also, check that your contact info is correct on the FSA website. That way, you don't miss any important communications while your loan transitioned to a new servicer.
2. Enroll in an IDR plan or hardship forbearance
While you're thinking about your student loans, it may be a good time to enroll in an income-driven repayment plan (IDR). This limits your federal student loan payment to about 10-20% of your disposable income, ensuring that you aren't caught off-guard when your new servicer resumes your monthly payments in February.
You can also apply for economic hardship deferment or unemployment deferment if you think you'll need additional time to afford your federal student loan payments after administrative forbearance ends.
3. Consider refinancing your student loans for better terms
Your new student loan servicer cannot change your loan terms. This means your total loan amount, interest rate, and monthly loan payments will stay the same as they were with your old servicer.
If you're not happy with your current terms, though, you can refinance to a private student loan. Keep in mind that refinancing your federal loans into a private student loan makes you ineligible for certain federal protections like IDR plans and administrative forbearance. But if you have private student loans, you don't have anything to risk by refinancing to a lower rate.
Student loan refinancing can help you secure a lower interest rate, lower your monthly payment and even pay off your debt faster. Borrowers who switched to a shorter loan term on Credible saved nearly $17,000 over the life of the loan. See what kind of student loan refinance rates you're eligible for by getting prequalified on Credible, and use a student loan calculator to decide if refinancing is right for you.
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