When it comes to switching student loan servicers, you don’t have many options. Refinancing, consolidating and applying for Public Student Loan Forgiveness are the only roads to change the company that handles your repayments.
For some borrowers, your student loan servicer is just the website you login to in order to make repayments each month. But it’s not always that simple — around 71% of borrowers in 2017 filed complaints about their servicers, according to the Consumer Financial Protection Bureau (CFPB). If you’ve run into problems with yours, it may be time to switch.
Here are three common issues others have faced:
- Difficulty getting information about repayment plans
- Payments that weren’t handled correctly
- Financial struggles that were ignored or not taken seriously
Before you switch, decide what you want in a servicer
If your servicer hasn’t been living up to your expectations, consider what qualities are most important to you when you begin your search for a new servicer. This might include:
- Strong customer service
- Transparent policies and fees
- Perks like unemployment protection, deferment or forbearance
- Easy-to-use app to make repayments
If you have multiple federal student loans, consolidation is the easiest way to switch servicers. This involves applying for a Direct Consolidation Loan, which combines all of your federal loans into one. Your interest rates will be averaged together, and you’ll have the ability to pick a new servicer.
How to consolidate your federal loans
Follow these steps to apply for a Direct Consolidation Loan on the Federal Student Aid (FSA) website:
- Visit StudentLoans.gov and click Repayment and Consolidation.
- Click Complete a Consolidation Loan Application and Promissory Note.
- Log in to your FSA account.
- Complete the application with information about yourself and your loans.
A step-by-step guide to filling out the Direct Consolidation Loan application
For borrowers with private student loans — or who don’t mind signing away their federal student loan benefits — refinancing is another way to switch servicers. You can refinance with a bank, credit union or online lender. Some handle repayments in house, while others use a third-party servicer. Do your research before applying to ensure you end up with a company with a good reputation for customer service.
How to refinance your student loans
Follow these steps to refinance your student loans — and in turn switch servicers:
- Compare your student loan refinancing options.
- Visit the provider’s website and complete the steps to submit your application.
- Wait for an approval decision.
- If approved, sign your loan documents and wait for your lender to pay off your current lenders.
- Begin making repayments to your new servicer.
A step-by-step guide to refinancing your student loans
This option is only open to a handful of federal borrowers due to strict eligibility requirements. And unlike the other options on this list, you don’t get to choose your new servicer: Your federal loans are automatically transferred to FedLoan — the only servicer that handle’s Public Service Loan Forgiveness (PSLF) applications. To qualify, you have to make 120 on-time repayments while enrolled in an income-driven repayment (IDR) plan and employed at a qualifying public service job.
How to apply for PSLF
It takes 10 years — sometimes even longer — to have your federal loans forgiven through PSLF. Follow these steps to get started:
- Make sure your job qualifies for PSLF.
- Review your federal loans and consolidate any ineligible ones.
- Sign up for an income-driven repayment plan for all of your federal loans.
- Submit your Employer Certification Form (ECF) to FedLoan — the DoE will then transfer your loans to this new servicer.
- Keep track of your repayments and submit your ECF each year.
- Fill out the PSLF application and submit it to FedLoan.
- Wait to hear back if you’ve been approved.
A step-by-step guide to filling out the PSLF application
Are there any other ways to switch federal loan servicers?
There are technically two other options, but they aren’t accessible to most people. Your loan may be transferred to a different servicer by the Department of Education (DoE), but this move can’t be requested. And if you apply for Total Disability Discharge, your loan will be transferred to Nelnet — the only federal servicer that handles this program.
If you have federal student loans and want to keep the benefits that come with them, the easiest way to switch your servicer is to consolidate your loans together. This will also make it easier to manage repayments each month. Otherwise, you might want to consider refinancing with a private lender. Not only can you switch servicers this way, but you might be able to qualify for lower rates or better terms.
You can learn more about how student loan servicers work with our guide.