If you have federal student loans, you didn’t get to choose your loan servicer. For some, that may not be a problem.
But if you have questions about your account, it’s possible you may not get the right answers or the help you need from the servicer you were assigned.
Fortunately, if you’ve had a bad experience with your student loan servicer, you have options. Here’s what to do if you’re unhappy with your servicer.
Who is my federal student loan servicer?
When you first took out your student loans, you should’ve received documents showing the details of your account and who your student loan servicer is. If you’re not sure who it is, you can call the Federal Student Aid Information Center at 800-433-3242.
Comfederal student loan servicers include:
- FedLoan Servicing (PHEAA)
- Granite State
- Great Lakes Educational Loan Services, Inc.
- OSLA Servicing
- Default Resolution Group (also called Maximus Federal Services, Inc.)
Each federal loan servicer is different, but FedLoan Servicing, Great Lakes, and Navient seem to get more complaints about their customer support and user experience than others.
For example, the Coronavirus Assistance, Relief and Economic Security (CARES) Act suspended payments on loans held by the federal government until the end of September 2020, and required loan servicers to report to the national credit bureaus as if borrowers were making on-time payments.
However, Great Lakes incorrectly reported payments as “deferred” instead of “on-time” for more than 4.8 million borrowers, which lowered credit scores in some cases.
In 2017, the Consumer Financial Protection Bureau sued Navient. The CFPB alleged that the servicer failed to correctly apply borrower payments, encouraging struggling customers to enter plans that ultimately costed more money, withheld information from borrowers that was necessary to maintain low payments, and more.
Finally, FedLoan Servicing is the only federal loan servicer that administers the Public Service Loan Forgiveness (PSLF) program. In 2019, 23 U.S. senators alleged that the servicer has mismanaged the program, denying forgiveness when it’s been earned and withholding information borrowers rely on to ensure they’re eligible.
How to change your student loan servicer
If you’ve had a bad experience with your student loan servicer or you simply want to choose your own, here are a handful of ways you can do it.
Consolidate your student loans with another federal servicer
If you want to keep your loans with the U.S. Department of Education, you can consolidate them with a Direct Consolidation Loan. During this process, you can choose to retain your current servicer or switch to a different one of your choice.
Just keep in mind that if you consolidate your loans with the federal government, the interest rate on your new loan will be the weighted-average rate across all of your old loans, rounded up to the nearest one-eighth of a percent.
In other words, it could potentially cost you a little more money over time, even if your repayment term stays the same.
Apply for Public Service Loan Forgiveness
Because FedLoan Servicing is the only servicer that manages the PSLF program, applying for it will automatically switch your servicer to FedLoan if you’re not already working with them. If you’re expecting to go through with the program, you won’t have much choice but to stick with FedLoan.
As such, it’s important to research the eligibility requirements for the program to make sure you qualify.
Refinance your student loans
Refinancing your federal student loans with a private lender is another way to switch companies. There are a number of different lenders that offer refinancing, and many of them have unique features and benefits.
Refinancing your student loans doesn’t just make it possible to switch servicers, though.
If you’re eligible, you may even be able to score a lower interest rate than what you’re currently paying, thus lowering your monthly payment and saving you money on interest charges.
The process can also give you some more flexibility with your repayment plan. Private lenders may offer terms ranging from five to 20 years, so if you can afford to pay down your debt faster, you can opt for a shorter repayment term and save both time and money. But if your goal is to get a lower payment, you can do that through a lower interest rate or a longer repayment term.
If you’re considering student loan refinancing, take the time to research different private lenders and compare them to find the best fit for you. In addition to low interest rates, you’ll also want to look into each lender’s customer satisfaction ratings, its repayment term options, and other features.
It’s important to note, however, that if you refinance federal student loans with a private lender, you’ll lose access to certain benefits, including loan forgiveness programs, income-driven repayment plans, and generous forbearance options.
Read More: 8 Great Reasons to Refinance Student Loans
Research and compare your options
If you’re unhappy with your federal loan servicer, take some time to consider all of your options to ensure you get the best possible fit for your needs and goals.
For example, if you want to retain your federal loans and the benefits that come with them, consolidating your debt with a different servicer may be a better option for you. The same goes if you’re working toward loan forgiveness through PSLF or another program.
However, if you don’t anticipate needing federal student loan benefits and you want more control over who you work with, refinancing your student loans may be the better choice.
If you’re considering this option, use Purefy’s Compare Rates tool to view rate quotes from multiple lenders in the same place.
If you can’t qualify for refinancing — or you can’t score a lower interest rate — on your own, consider asking a loved one to co-sign your loan with you to improve your chances. It’s best to add a co-signer who has a strong credit history and a relatively high income.
The bottom line
Dealing with federal student loan servicers can be frustrating. But while you didn’t have the option to choose yours at the start, you do have options now.
Take your time to consider your current financial situation and your goals with your student loans. Then think about the different options you have to switch servicers, and choose the path that best suits your needs.