A common headache of life with student loans is dealing with a loan servicer transfer or change.
For most borrowers, the best-case scenario is a minor inconvenience. However, if things go poorly, borrowers may miss payments or fall for a scam.
As someone who has dealt with this issue before, I’ve put together the following guide for borrowers facing a student loan servicer change.
Making Sure the Student Loan Servicer Change is Not a Scam
Borrowers are smart to be on the lookout for student loan-related scams.
Because the change in student loan companies is a confusing yet common practice, student loan scammers may try to take advantage of unsuspecting borrowers.
Fortunately, borrowers have several tools available to make sure that the transfer is legitimate.
- Call the original student loan company. If your debt will be sold to another lender or serviced by a different company, your current lender should know all about it.
- Find external verification. These transfers often happen on a large scale, making it a newsworthy event. Many Wells Fargo borrowers recently learned their loans were moving. Wells Fargo shared the news on their website, and many articles on the subject were written.
- Check the federal database. The Department of Education keeps detailed records on federal student loans. This information includes the company assigned to service the loans. If you receive notice that your federal loans are being serviced by someone new, check the federal database to see if it is true.
It’s awful that borrowers have to constantly be on the lookout for scams, but in this instance, verifying legitimacy takes very little time.
Terms and Conditions Stay the Same
The lender that owns the debt may change. The company responsible for collecting bills and answering questions may change. However, the terms and conditions of the student loan do not change.
A student loan is a contract between a borrower and a lender. Lenders cannot just raise rates or change loan terms. If you get moved to a new student loan company, your monthly payment and interest rate should not change.
The only exception is borrowers with variable-rate loans. If the transfer happens at the same time as an interest rate recalculation, borrowers may see a different interest rate or monthly payment.
Steps to Take Before Any Transfer
If you get word that your student loan is on the move, you should jump into action.
- Download copies of all billing statements. If the move happens and the balance looks off, you may need proof of your prior payments.
- Update contact information. If your address or email has changed, you will want to update this info. Missing out on essential communications could lead to missed payments.
- Turn off automated payments. If your bank automatically makes a payment each month, you don’t want that payment to go to the old student loan company. Likewise, your old lender should stop pulling auto-debits, but the smart move is to turn it off so that no mistakes happen.
- Save copies of all lender emails and communications. Once you are with a new student loan company, it will be hard to access old records and conversations. If you save a copy, it might come in handy in the future.
Preventing a Change in Student Loan Servicers
Unfortunately, borrowers usually have little say in whether or not their student loan company changes.
Private lenders routinely sell student debt to other lenders, and the federal government routinely contracts with new servicers. Lenders carefully draft student loan contracts to ensure that they have the right to make these changes.
However, there is one way that borrowers can take control of the situation. If they choose to refinance their student loans, they can essentially pick their next lender and get a lower interest rate or better repayment terms.
Refinancing federal loans with a private lender is a significant risk because borrowers give up the generous federal perks. However, refinancing a private loan is usually a good idea as long as the borrower can find a better interest rate and repayment terms.
At present, the following refinance companies offer the lowest interest rates:
| Rank | Lender | Lowest Rate | Sherpa Review |
|---|---|---|---|
| T-1 |  | 5.28% | ELFI Review |
| T-1 |  | 5.28%* | Splash Financial Review |
| 3 |  | 5.49% | Laurel Road Review |
