If you’re a student loan borrower, you may already be aware that key changes have been enacted to federal student loans and how they are serviced. Because the U.S. Department of Education has contracted five new companies to handle the process of collecting loan payments and providing customer service on federal student loans, many loan borrowers will in turn be changing the servicing company they deal with.
The U.S. Department of Education cites a need for improved customer service and accountability amongst its reasons for initiating this change. While federal student loan borrowers don’t have the option to choose which servicer they work with, there are a few important steps you can take to insure that you’re ready for the coming changes and in the best position to protect your financial interests.
Get In Touch With Your Existing Servicer
The first step is to get in touch with your existing servicer and ask for a record of your payment history to-date. Having this proof will be essential to ensure that your account balance is correctly transferred to your new service provider – and that if any numbers don’t add up, you can prove what money has been paid, as well as demonstrate the timeliness and reliability of your payments.
Save Copies of Documents and Communications
Moving to a new servicer could mean that you will lose any records of communication with your previous servicer – so be sure to save copies of these. It’s a good idea to have both a hard copy and a digital copy of correspondence, and any other important documents related to your loan payment history. That way, in case of any possible dispute, you’ve got records on hand.
Check and Re-Check Your Credit Report and Score
It’s always a good idea to regularly monitor your credit report, as having a good credit score can seriously impact your future borrowing opportunities, the price you’ll pay for insurance, and so on. The changeover in student loan servicers is an important moment to keep up with your credit, in case any inaccuracies are reported. Aim to check this information every few weeks, and be ready to get in touch with your new servicer if something doesn’t look right. You can access your free credit reports weekly at www.annualcreditreport.com and many financial institutions offer their members their free credit score; reviewing your credit report and score will not impact your score negatively.
Keep an Eye on Your Accounts
Changing your loan servicer will also mean a change to how your payments are processed, so be sure to keep an eye on your accounts and make sure that all updates have been properly applied and everything is running smoothly. This is especially true if you’re using an auto-pay system, which will likely require additional steps to ensure everything is functioning as it should be with your new servicer.
Evaluate Your Existing Payment Preferences
The change in service provider won’t change your monthly loan payment amount; but if you like, you can take this opportunity to reevaluate your existing payment preferences. It’s possible that your financial situation has changed in the past few years, in which case you may wish to re-think the original terms of your loan. A graduated repayment plan in which payments slowly increase could be a good option to pay off your loan sooner if you’ve got steady employment; and on the other hand, an income-driven plan that caps payments based on income percentage might be useful if you need more tailored flexibility.
Consider Federal Loan Consolidation
If you have multiple student loans, it might be possible to combine them into a single federal student loan with one fixed interest rate. This process is free, and it can help to ease the hassle of making multiple monthly payments; which could be useful as you get a handle on any new aspects of having a new loan service provider. Consolidating your multiple federal loans into one new one may impact federal benefits or public service loan forgiveness payments; speak with your servicer to discuss what, if any, impact consolidations may have on your current benefits.
While there’s no system of federal refinancing, it is possible to refinance your federal student loan with a private borrower, although this may mean giving up key benefits – so consult a financial expert as needed and be sure you understand all the terms and conditions before making any final decision.