Transfer Student Loans to Another Person: – What Happens If Your Student Loan Servicer Changes?

Despite the fact that the Department of Education issues Federal loans to students, it does not interact with borrowers on an individual basis. Instead, it contracts with third-party loan servicers to handle the administrative burden of student loan debt.

At the moment, the Federal Student Aid Office collaborates (or has collaborated) with eleven different loan servicing organizations. Borrowers are often assigned to a single loan servicing firm for the duration of their loan term. From the corporation, they are given their first disbursement of funds. And when they pay off the loans, they receive a celebration letter from the same servicer, which can take anywhere from 10 to 30 years.

However, not every borrower has had this type of experience. Transferring a loan to a different loan servicer is something that the U.S. Department of Education can do at any time (and in the past, they’ve done it for some borrowers approximately every 5 to 10 years). In the event that your student loan servicer changes, here’s what you should know.

What Is the Role of a Student Loan Servicer?

After receiving their first Federal student loan, the Department of Education assigns the borrower to a loan servicer, which is responsible for managing the loan. The loan servicer’s website or mobile application will be the primary means of accessing the loan account from that point forward.

Loan servicing firms are responsible for disbursing payments to borrowers, sending out bills, and collecting payments from them. Changes to your repayment plan or requests for deferral or forbearance must be made through your loan servicer as well as the lending institution.

FedLoan Servicing (which is likely to be replaced by MOHELA in the future) is the only loan servicing company that currently tracks progress toward Public Service Debt Forgiveness (PSLF) and other loan forgiveness programs.

What Causes Student Loan Servicers to Switch?

It is possible for student loan servicer changes to occur for a variety of reasons. Sometimes the borrower is the one who initiates the relocation. In other circumstances, the Department of Education may impose a change on the school district. Several examples will be discussed further below.

Actions by the Borrower

Borrowers are not permitted to switch federal loan servicers at any time without the permission of the government. In other words, if you are dissatisfied with the service you are receiving, you cannot simply demand to be transferred to a different organization.

However, there are a few acts that borrowers can do that will result in a change of servicer. For starters, borrowers who consolidate student loans have the option of choosing their loan servicer during the consolidation process. Following the consolidation, the debts will be transferred to the loan servicer of your choice, unless you specify otherwise.

A second scenario would be if you decide to apply for Public Service Loan Forgiveness through your employer (PSLF). Your loans will be automatically transferred to FedLoan Servicing once you have registered for the program.

As a last example, consider the process of applying for disability discharge. If you pursue a disability discharge, your loans would be moved to NelNet, which is the current loan servicer that handles all disability discharge petitions. If you pursue a disability discharge, your loans would be transferred to NelNet.

Actions by the Department of Education

Loan servicers can change for a variety of reasons that are beyond the control of the borrower. It is possible that the Department of Education will simply decide not to renew the contract with your service provider. In addition, when your existing contract expires, your account will need to be transferred to a new company in order to continue operations.

These kinds of transformations do not occur frequently. On the other hand, the Department of Education stated in June 2020 that it has inked new servicer agreements with the following five companies:

• Edfinancial Services
• F.H. Cann & Associates
• MAXIMUS Federal Services
• Missouri Higher Education Loan Authority (MOHELA)
• Texas Guaranteed Student Loan Corporation (Trellis Company)

Currently, only Edfinancial Services and the Missouri Higher Education Loan Authority (MOHELA) are responsible for servicing federal student loans. As a result, unless your loans are with one of those businesses, there is a good probability that you will be switching servicers in the near future.

In a later release, the Department of Education stated that it will not be transferring any customers to new loan servicers in the coming year. However, when these changes become effective (which is expected to be sometime in 2021), millions of student loan borrowers may be forced to transfer servicers.

The reason for this is a variety of factors, but considering the Covid-19 Student Loan Relief initiatives, it appears to be a smart idea to avoid confusion among borrowers.

Contracts Come to an End

FedLoan Servicing, one of the nation’s top student loan servicing organizations, just indicated that it will not seek to renew its existing contract with the Department of Education, as previously reported. Consequently, the existing contract will be terminated on December 14, 2021, as previously stated.

Now that this has occurred, the Department of Education will begin the process of transferring current student loans to other loan servicers. As a result, if you are a borrower, your loan will be transferred to a different organization.

At this time, it is unclear which firms will be in charge of programs such as Public Service Loan Forgiveness, but all FedLoan borrowers should be prepared in case this happens.

It appears that the vast majority of Federal Loan borrowers will have their student loans transferred to MOHELA. In the year 2021, the move will take effect on October 4, 2021. You may find out more about it by visiting this page.

Exactly what happens when a student loan servicer changes?

The good news is that if your student loan servicer changes, you will not have to worry about having to “start over” with fresh student loans. When a loan servicer changes, the payment terms for student loans do not alter. In addition, all previous payments should be taken into consideration.

Loan servicers are responsible for making the transfer from one loan servicer to another as seamless as feasible for their customers. In the event that a student loan servicer changes, according to StudentAid.gov, the following procedures should be followed:

Customers who are currently serviced by a company will receive an email advising them of the switch.
Loans are transferred from current servicers to the new servicer.
Borrowers will obtain letters of introduction from the new servicer.
The information about the borrower’s account will be transferred to the new servicer, ensuring that the new servicer’s website appropriately reflects the borrower’s payment history.
During the changeover, both servicers will work cooperatively to ensure that all payments are credited to the borrower’s loan account on a timely basis.
Some miscommunication or incomplete records with your new loan servicer may occur during the first several weeks of service. However, when the changeover period draws to a close, everything should be in order.

In the event that my student loan servicer changes, what should I do?

In the event that your loan servicer changes, you won’t have to do much on your end as a borrower. You will simply set up an online account with the new loan servicer to begin the process. In order to set up automatic drafts or bill payments with the new loan servicer, you must first contact the new loan servicer and request permission. It will also allow you to keep track of the debts that you have taken.

As a last note, you will be required to transmit your monthly loan payment to the new loan servicer as well. The quickest and most convenient method of doing so will be through the loan servicer’s web interface. You can, however, send checks to the new loan servicer provided it has confirmed your account with the previous one.

It is important, however, that you have complete and accurate records of your loans prior to making any loan changes. If you want to ensure that your records are correct after the changeover, you should keep copies of your statements and loan amounts.

What Can I Do If I’m Dissatisfied With My New Service Provider?

When your loan servicer changes, you may be able to switch servicers on your own terms if you have the option to do so. One of the most common methods of moving servicers is through the consolidation of federal loans. Customers who consolidate their debts have the option of selecting any loan servicing business of their choosing when doing so.

If consolidating your student loans is not an option for you, you can file a complaint with the Department of Education’s Federal Student Aid Feedback System against your loan servicer. Additionally, you can submit a complaint with the Consumer Financial Protection Bureau (CFPB) or the Better Business Bureau (BBB).

The option of seeking assistance from a state ombudsman for student loan issues may also be available to you depending on your state. Among the provisions of California’s Student Loan Borrowers’ Bill Of Rights is the creation of a new ombudsman who will be available for borrowers in the state to contact in the event of a dispute.

Finally, you might want to think about refinancing your federal student loans with a private lending institution. It is possible that you will be able to cut your interest rate if you refinance your student loan. However, you’ll miss out on benefits such as Income-Driven Repayment (IDR) and federal forgiveness programs if you choose this option.

You should avoid refinancing federal student loans just for the sake of receiving better customer service. However, if you want to pay off your debts as quickly as possible while paying the least amount of interest, refinancing may be an option. Even better, if your service improves as a result, it’s the frosting on the cake.

can student loans be transferred to another person

Yes, Regardless of the motivation for your curiosity, you might be asking yourself, “Can I transfer my student debts to another person?” You are free to do so; but, not through the Department of Education. You will need to find someone who is prepared to refinance the student loans under their own name with a private lender in order to transfer the loans.