Everyone has customer service horror stories.
But unreliable customer support is especially hard to deal with when they concern your student loans — a monthly expense that’s at an all-time high for Americans and causes immense financial strain for millions.
You may think you have little to no control of your student loan servicer, but there is a way to pick a new one — sometimes with the added benefits of a lower interest rate and better repayment term.
If you’re unhappy with your student loan servicer, this is how you can change it to suit your needs.
First, what’s the difference between your student loan lender and servicer?
Your lender is who you’re borrowing money from. For federal student loans, that’s the U.S. Department of Education. For private student loans, it’s usually a bank, credit union, or other financial institution.
In between your lender and servicer there’s actually another party that’s not discussed very often — a loan originator. That’s who handles your application and approval, presents your loan agreement, and disburses your funds.
And lastly, there’s your loan servicer. That’s who you’re most familiar with and used to dealing with — month in and month out. It’s the company that’s responsible for managing your monthly bills, receiving payments, reviewing deferment or forbearance requests, and performing all the general maintenance related to your loan.
If something seems wrong with your loan or you have a question, it’s your loan servicer who you’ll be talking to directly. Depending on your loan, you may be in regular communication with your servicer for 10 years or more.
So needless to say, trustworthy customer support and helpful service are essential in such a long-term relationship.
So, how did you end up with your student loan servicer?
You may be wondering how you even got stuck with your student loan servicer in the first place — especially after having a poor experience. Depending on the types of student loans you have, there may be different reasons.
Federal student loans
Federal student loans are issued by — you guessed it — the federal government. And that generally means you don’t have a choice of who your servicer is.
The U.S Department of Education automatically assigns your loan servicer to you. Usually, it’s one of these nine companies:
- Great Lakes Educational Loan Services, Inc.
- FedLoan Servicing (PHEAA)
- Granite State – GSMR
- OSLA Servicing
Private student loans
On the flip side, private student loans can come from a range of financial institutions — and you have control of the private lender and servicer you choose.
However, what the right solution was when you originally applied for your private loans might not be right for you now.
You could have a higher rate than you’d like, a repayment term that’s too long or short, or a loan servicer who has proven to have unreliable customer support.
How you can change your student loan servicer
If you’ve had a bad experience with a federal or private loan servicer, student loan refinancing could the answer.
A refinance allows you to take out a new loan — with a new private lender of your choice — for the total amount of your outstanding student debt. And that includes a new loan servicer.
It can be a smart opportunity to get a re-do on choosing your lender and the servicer they work with to get top-notch service going forward.
Outside of just picking a new servicer, refinancing can also help you get a new rate and term that are a closer fit with your current financial needs.
The key benefits of refinancing include:
- Consolidating all your student loans into one, with just one loan servicer and monthly payment to worry about.
- Getting a lower rate to save money on interest, both month-to-month and over the life of your loan.
- Choosing a new repayment term — either shorter or longer — to better align with your pay off goals.
The tricky part of refinancing is getting approved — private lenders often have pretty strict eligibility guidelines like having a strong credit score and high income.
But if you can’t qualify on your own, there’s good news. You can always try applying with a creditworthy cosigner which can help significantly with approval and being offered lower rates.
If you do refinance, you will give up your federal benefits like income-driven repayment plans and federal forbearance. However, if you don’t plan on using these benefits, saving money may be the more attractive option.
If you want to keep those benefits, you may still be able to select a new servicer if you apply for a federal Direct Consolidation Loan.
Compare refinance rates before applying
If you’re looking to change your loan servicer through student loan refinancing, the most important thing is to shop around first.
Before applying, take advantage of Purefy’s Compare Rates tool to easily find the best rates, terms, and other features — including loan servicers.
After seeing the offers you qualify for and choosing your favorite, make sure you do research on that lender’s loan servicer. Most private lenders disclose who services their loans either on their website or in your loan documents.
By comparing your refinancing options and double checking each loan servicer’s reputation, you can reap the rewards of refinancing and get better customer service for the remainder of your loan.