What to Do If Your Federal Student Loan Servicer Changes Without Notice

Federal Student Loan Servicer Changes Often Occur Without Clear Advance Notice

In recent months, many federal student loan borrowers have experienced unexpected transfers of their loan servicing accounts from established companies like Nelnet to newer servicers such as Central Research, Inc. (CRI). These changes sometimes come without explicit prior notification, leaving borrowers confused and concerned about the status of their loans.

One borrower reported receiving an email on August 15 informing her of the transfer authorized by the U.S. Department of Education (ED), despite having no prior direct communication. The only earlier notice was a letter posted within her Nelnet account portal, which she had not checked.

Administrative Forbearance During Transfers Can Lead to Interest Accrual

During the transfer process, loans are frequently placed into an administrative forbearance status. This pause prevents borrowers from being marked delinquent while accounts transition between servicers, but interest continues to accrue on the outstanding balance. Borrowers may find their next payment due date delayed by up to 60 days, as was the case for this borrower whose next payment was not due until late October.

Mark Kantrowitz, a higher education expert, explained that administrative forbearance is a standard practice to avoid payment misapplication but cautions that interest accumulation can increase overall debt. Borrowers pursuing forgiveness programs typically retain credit during this period.

Recommendations for Borrowers to Safeguard Their Interests

Experts advise borrowers to proactively download and save detailed records from their current servicer and the Federal Student Aid portal when notified of a pending transfer. Important documents include loan balances, interest rates, payment histories, and any official communications. Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program, emphasized the importance of maintaining these records to identify and contest any discrepancies arising from the transfer.

If a borrower discovers the transfer only after it has occurred, they should attempt to access their previous servicer’s records promptly to preserve this information. According to Nierman, the fundamental loan terms and eligibility for repayment plans or forgiveness programs should remain unchanged despite the servicer switch.

Payment Timing and Credit Considerations During Transfer

Borrowers considering making payments during the transfer period face risks. Kantrowitz noted that payments might be lost because the previous servicer no longer accepts payments while the new servicer’s systems may not yet be fully operational. The recommended approach is to set aside the usual payment amount and remit it once the new servicer account is active.

Administrative forbearance should not negatively impact credit scores. However, borrowers are advised to monitor their credit reports after the forbearance ends to ensure no erroneous late payments have been reported.

Verify Account Details and Reenroll in Automatic Payments

Once the new servicer assumes responsibility, borrowers should verify that all personal information, including mailing address, contact details, loan balances, interest rates, and payment amounts, are accurate. If previously enrolled in automatic payments—which often confer a small interest rate reduction—borrowers may need to reenroll with the new servicer to retain this benefit.

For a list of federal student loan servicers and contact information, borrowers can visit studentaid.gov.