Brace yourselves. Major student loan servicing changes are coming.
First, some quick background. Most federal student loans are either owned directly by the U.S. Department of Education via the “Direct” loan program, or are held by a private lender via the now-defunct “FFEL” program (also known as the “guaranteed” loan program). The vast majority of Direct and FFEL student loans are not handled by the lender, however. Instead, the lenders hire contractors – called student loan “servicers” – to manage the day to day operations of the loan accounts such as payment processing and application evaluation. These servicers generally do not own your student loans, even though you have to deal with them to do anything with your account. They are simply contractors working on behalf of the lender.
The U.S. Department of Education is moving forward with a major overhaul of its student loan servicing system that will transform every aspect of federal student loan repayment – from payment processing, to re-certification for income-driven repayment plans, to requests for deferments and forbearance.Read More