Banking giant Wells Fargo recently announced its exit from the student loan business. Current Wells Fargo borrowers should expect some changes to their student loans.
The good news for current Wells Fargo customers is that the changes will be a small hassle rather than a major issue in most cases.
Some borrowers may also have the opportunity to eliminate any inconvenience.
Changes Coming for Wells Fargo Borrowers
Wells Fargo is selling all of their student loans to investors. Firstmark will service the student loans.
Wells Fargo has not announced a specific date for the move, but they will stop accepting all student loan applications starting January 21st, 2021.
From the borrower’s perspective, this transfer means no more bills from Wells Fargo. Instead, Firstmark will handle all student loan questions, billing, and issues.
However, loan terms and conditions will not change. The move should not impact interest rates or the amount due each month.
Preparing for the Move from Wells Fargo to Firstmark
If I were a Wells Fargo customer, I would take the following steps:
- Cancel any automated payments – Some people schedule monthly payments from their bank to Wells Fargo each month. Others authorize Wells Fargo to withdraw their payment each month automatically. Borrowers should cancel both services. The payee information for auto banking payments will change, and there is no reason for Wells Fargo to have continued banking account access or information.
- Update my contact information with Wells Fargo – During the transition, Wells Fargo may send important letters or emails. Missing any critical information could lead to a missed payment and potentially late fees or negative credit reporting. Up to date contact information helps prevent any issues.
Ultimately, the process amounts to an inconvenience for borrowers. You will need to monitor the transition to make sure you never get charged twice and make sure that you don’t skip a monthly payment.
It isn’t ideal, but it isn’t a catastrophic situation in most cases.
The Big Potential Downside to Borrowers
A borrower’s lender and servicer can have a considerable impact on their student loan experience.
In most cases, the impact amounts to nothing more than the company that receives a payment each month.
However, for borrowers who are struggling, the student loan companies have a huge impact.
Wells Fargo is a major bank. They have spent millions on advertising to improve their reputation with customers. For student loan borrowers, this means Wells Fargo may have an incentive to work with borrowers who are struggling. Even though the loan contract doesn’t require extra help, lenders sometimes find a way to accommodate borrower needs.
The shift to Firstmark servicing on loans owned by investors could mean less flexibility. In previous research on Firstmark, I found borrower complaints about Firstmark’s lack of flexibility and help. The outside investors may not care if consumers hate them. They may instruct Firstmark to strictly enforce all terms of the loan contract.
Stopping the Loan Transfer to Firstmark
Many borrowers may want to prevent the move to Firstmark.
After all, the contract they signed was with Wells Fargo. Can’t borrowers prevent the sale to investors or move to Firstmark?
Unfortunately, it is almost certainly impossible for borrowers to stop Wells Fargo. The selling of debt from one lender to another is standard business procedure.
I haven’t personally reviewed any Wells Fargo student loan contracts, but I would be shocked if any provision allowed borrowers to prevent the transfer.
The only realistic shot for borrowers to prevent the transfer to Firstmark is to move on from Wells Fargo.
Making the Process Easy and Finding a Better Loan
Borrowers can take control of the situation by refinancing their Wells Fargo Loans.
The traditional motivation behind refinancing is to get a lower interest rate on your student loans. In this case, borrowers may be able to get a lower interest rate and avoid potential Wells Fargo/Firstmark Services issues.
In a refinance, the new lender pays off the old debt, and the borrower repays the new lender according to a new loan contract. Borrowers need to take the time to apply with a new lender and to set up payment information with the new lender. However, the refinance company will be responsible for paying off existing loans.
By refinancing, borrowers can accomplish the following:
- Choose their next lender,
- Lower interest rates, and;
- Avoid headaches with the transition from Wells Fargo to Firstmark.
At present, the best refinance rates are available with the following lenders:
|Rank||Lender||Lowest Rate||Sherpa Review|
|2||5.49%||Laurel Road Review|
|3||5.72%*||Splash Financial Review|