Are you dumped by your student loan officer?
Here’s what you need to know – and what it means for your student loans.
Two major student loan managers announced last month that they will no longer serve federal student loans, which will affect nearly 10 million student loan borrowers. This means that over 20% of student loan borrowers will be affected by this major announcement. It also comes at a time when student loan cancellation has become a hot topic on Capitol Hill. First, FedLoan Servicing, also known as the Pennsylvania Higher Education Assistance Agency (PHEAA), announced that it not renew his 12-year contract with the US Department of Education for the service of federal student loans. The PHEAA offers student loans to approximately 8.5 million student borrowers, which represents approximately 20% of all federal student borrowers. Second, Granite State Management & Resources, which is part of the New Hampshire Higher Education Association Foundation (NHHEAF) nonprofit network, also announced that it would end its federal service contract to focus on serving private loans. Naturally, this can cause confusion, frustration, and perhaps panic, for millions of student loan officers who wonder about the potential implications. So, let’s simplify things for you and break down the details, so you don’t get caught off guard.
Student loans: do you have a new student loan manager?
Here are the answers to 11 important questions about your student loans, including how to determine if you are affected by this major announcement and what it means for your student loans:
1. How do you know if your student loans are affected?
If your federal student loan manager is FedLoan Servicing (PHEAA) or Granite State Management & Resources, you could be affected. About 10 million student loan borrowers will be affected as these student loan managers will stop handling federal student loans after their contract with the US Department of Education expires on December 31, 2021. If you don’t know who is your student loan manager, your student loan manager is the business or entity to which you pay your student loans each month. If you are still not sure, log into your Federal Student Aid (FSA) account and consult your student loans manager on the FSA Account Dashboard. You can also call Federal Student Aid at 1-800-4-FED-AID (1-800-433-3243). The changes come at a time when some lawmakers, such as Senator Elizabeth Warren (D-MA), say student loan services have failed student loan borrowers during the Covid-19 pandemic, when student loan payments feds were temporarily suspended.
2. Will you be notified if your student loans are affected?
Yes, you will be notified in writing by the US Department of Education if your student loans are affected. It is essential that you update your contact information in your FSA account and with your student loan manager to ensure that you receive all relevant communications from student loan borrowers.
3. When will you be notified if your student loans are affected?
You will be notified before December 31, 2021, the date on which the student loan service contracts will end. The US Department of Education has not announced an official date on which it will contact the 10 million student loan borrowers who will be affected.
4. Which student loan manager will take care of your student loans from now on?
You will get a new student loan manager who will continue to manage your student loans without interruption. All affected student loans will be reassigned to a new student loan manager, although the specific student loan manager assigned to you has not yet been announced.
5. Will the interest rate on your student loans change?
The interest rate on your student loan will not change due to the change in student loan officer. This is a major point of confusion among student loan borrowers. If your student loan manager changes (and this can happen more than once during the term of your student loan), be aware that your student loan terms will not change as a result. When you borrowed your student loans, you signed a principal promissory note, which included the terms and conditions of your student loan. This primary promissory note is honored for the life of your student loan, even if you change your student loan provider. Federal student loans have a fixed interest rate, which means you’ll have the same interest for the life of your student loan. Some older federal student loans have variable interest rates, which means the interest rate can change over time. However, even the interest rate on a variable interest rate student loan will not change as a direct result of the change in student loan manager.
6. Will your student loan repayment plan change?
Just like your interest rate, your student loan repayment plan won’t change if you get a new student loan manager. For example, there are four main types of income-based repayment plans: IBR, PAYE, REPAYE, and ICR. If your student loans are registered with REPAYE, for example, with your current student loan manager, you can also continue with REPAYE with your new student loan manager. That said, now is the time to update your income, family size, and residence status with your student loans manager. Why? These factors can affect the amount of your monthly student loan payment for an income-based repayment plan, and they could help you get a lower student loan repayment. You can also change your income-based repayment plan if a different plan could help you get more student loan cancellations, for example.
7. Will this affect your student loan balance?
Like your interest rate and your student loan repayment plan, changing your student loan manager will not affect your student loan balance. Your new student loan manager will not change your student loan balance amount when you have a new student loan manager. That being said, your student loan balance may change due to the accumulation of interest, for example, but this will not be directly due to the change in student loan service.
8. Will changing your student loan manager affect your credit score?
There is no impact on your credit score when you change your student loan manager. When it comes to student loans, the best way to increase your credit score is to make your student loan payment in full each month on time and not to skip your student loan payments.
9. Does this change affect private student loans?
These two announcements only affect federal student loans.
10. If you are affected, should you stop paying off your student loan?
Don’t stop paying off your student loans if your student loan manager changes. Student loan borrowers should continue to make normal student loan payments. Once you are assigned to a new student loan manager, if you are affected, be sure to update your automatic payment information with your new student loan manager. This will help ensure a smooth transition and avoid any missed student loan payments or late fees.
11. How do you contact your student loan manager?
Contacting your student loan manager is easy. Now is a good time to go ahead and contact your student loans manager to determine if you are affected.
Student loans: next steps
If you have student loans and your student loan manager is about to change before the end of the year, don’t worry. Yes, it’s not practical, but for the vast majority of student loan borrowers, the transition should be relatively smooth. The US Department of Education strives to ensure a transparent process for all affected student loan borrowers. The student loan relief will also expire on September 30, 2021. For now, this hidden clue suggests that Biden will not extend the student loan relief. This means that in the absence of an extension, student loan payments for federal student loans will resume effective October 1. Therefore, it is possible that some student loan borrowers will restart student loan payments with a single student loan manager for October, November, and December, and then switch to a new student loan manager in January.
If you have student loans, make sure you understand all of your student loan repayment options. This is especially important if you’re getting a new student loan service and your student loan payments will start again on October 1. Here are some popular options for saving money with your student loans: