What Is a Student Loan Servicer?

Student Loan Servicers Explained

A recent college grad sets up his student loan servicer account.
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Roberto Westbrook / Getty Images

A student loan servicer is a company that manages your federal student loans. It is responsible for all loan-related administration, including responding to questions, processing payments, and facilitating changes to your repayment plan.

Learn how student loan servicers work and how the Department of Education’s (DOE) upcoming changes to the process will impact you and your federal student loans.

What Is a Student Loan Servicer? 

A student loan servicer is a company that the Department of Education (DOE) uses to handle repayment, billing, and other aspects of your federal student loans. The DOE assigns each borrower to a servicer once the borrower’s loan is disbursed. 

There are currently nine different federal loan servicers:

  • FedLoan Servicing
  • Granite State
  • Great Lakes Educational Loan Services, Inc.
  • HESC/Edfinancial
  • Missouri Higher Education Loan Authority (MOHELA)
  • Navient
  • Nelnet
  • OLSA Servicing
  • ECSI

The DOE uses Default Resolution Group to service loans that have gone into default.

What Do Student Loan Servicers Do? 

A student loan servicer manages details big and small related to your federal student loans. Because federal loans are complex products with a variety of repayment options, monthly payment amounts, and loan-forgiveness criteria, a servicer performs many tasks throughout the life of a federal student loan. Tasks include: 

  • Tracking student loans that borrowers have received 
  • Answering borrower questions and providing customer service
  • Collecting payments 
  • Maintaining records of borrowed funds and repayment progress 
  • Processing requests for changes to repayment plans 
  • Processing requests for deferment or forbearance 
  • Working with borrowers on options to avoid default
  • Providing 1098-E tax forms if you paid at least $600 in student loan interest during the year

Under the current system, the DOE assigns a loan to a servicer, which then contacts the borrower to begin the loan administration process. Borrowers may also contact the Federal Student Aid Information Center (FSAIC) at 1-800-433-3243 to find out who their servicer is.

Servicers can be reassigned at any time, and one borrower may have multiple servicers. If your federal student loans are transferred from one servicer to another, your loans will still be owed.

How Are Loan Servicers Paid?

Borrowers do not pay fees to servicers directly. Instead, the DOE pays loan servicers based on the terms of contracts—the specifics of which have not been disclosed. 

In total, the DOE paid more than $826 million in student loan servicing fees in 2019. However, the transition to Next Gen—the DOE’s initiative to streamline the servicing process—is expected to result in reduced outlays on loan servicing. The DOE was able to cut its 2020 loan servicing budget by nearly $300 million as a result of the Next Gen program. 

Don’t ever pay a fee for assistance managing your student loan, as loan servicers are responsible for providing free help to borrowers. 

Upcoming Changes to Student Loan Servicing

In June 2020, the DOE announced it will overhaul its loan servicing program to streamline the servicing process—a plan that initially came to fruition in 2017. Known as the Next Gen project (short for Next Gen Business Process Operations), the DOE will implement the following changes under the new program: 

  • There will be one website through which borrowers access their servicer account, rather than separate websites for each servicer
  • New contracts with servicers that incentivize successful account management and provide consequences for unmet contractual requirements
  • Contracts with five new loan servicers
  • Contract extensions for FedLoan Servicing, Great Lakes, Nelnet, and Navient through December 2021
  • Contract extensions for CornerStone, Granite State, HESC/Edfinancial, MOHELA, and OSLA Servicing through March 2022

Borrowers will receive advance notice of any change to their loan servicer. The DOE noted this past summer that servicer changes will be preceded by a multiplatform campaign (emails, social media, etc.) to alert you of what to expect with the upcoming changes

The five servicers participating in the new student-loan servicing platform will be: 

  • Edfinancial Services LLC
  • F.H. Cann & Associates LLC
  • MAXIMUS Federal Services Inc.
  • MOHELA
  • Texas Guaranteed Student Loan Corporation (Trellis Company)

The DOE will phase in these new servicers over time, with contracts for existing servicers extended enough to provide time for the transition. After the transition, borrowers will experience more streamlined service. They’ll be able to call just one number to connect with their servicer, and servicers will be trained to handle student loans, FAFSA questions, grants, and other aspects of borrowing beyond loans. 

Key Takeaways

  • The DOE contracts with student loan servicers to manage federal student loans.
  • Student loan servicers process payments, answer borrower questions, and manage requests for payment plan changes, deferment, or forbearance. 
  • There are currently nine federal student loan servicers who were paid more than $826 million in servicing fees in 2019. 
  • Under the Next Gen System, the DOE has entered into contracts with five loan servicers to provide a more streamlined experience for borrowers.
  • Borrowers will receive advance notice if their loan servicer changes.