In case you missed it, the U.S. Department of Education is making huge changes to the federal student loan servicing system next year. It’s part of Secretary Betsy DeVos’s Next Gen Federal Student Aid initiative, which aims to improve the borrowing and repayment experience. The system will become a single, centralized platform as early as December 2020 — when contracts end for current servicers like Nelnet and Great Lakes.

To replace the old servicers, five new companies will shoulder most of the federal student loan portfolio:

  • EdFinancial Services
  • F.H. Cann & Associates LLC
  • MAXIMUS Federal Services Inc.
  • Missouri Higher Education Loan Authority (MOHELA)
  • Texas Guaranteed Student Loan Corporation (Trellis Company)

Here’s everything we know about the new federal student loan service companies

1. They’re supposed to be more accountable and easier to use.

According to DeVos, the new contracts are “another major step toward our commitment to improving customer service and holding our contractors accountable for their performance.”

In the past, student loan servicers have faced scrutiny for bad lending practices as well as state law violations. Currently, there isn’t much accountability for servicers, and there’s also no standardization — all tools and websites are unique to each. With nine different servicers and four operating platforms, there’s a lot of room for error.

[ Read: The Best Student Loans of 2020 ]

Borrowers who are spread across multiple providers have to bend over backward just to keep up. Right now, transferring your loans is a complicated process with even fewer protections. The jumble of different policies and procedures around payment and processing make it nearly impossible for borrowers to escape unscathed.

“Simplification and standardization of the historically complex and disjointed student loan servicing environment should go a long way in helping borrowers navigate repayment with fewer headaches,” says Derek Brainard, Director of Financial Education at AccessLex Institute.

The coronavirus pandemic and the executive order to defer interest and delay loan payments until September 30 only cast a spotlight on the convoluted nature of our system. Borrowers are now forced to embark on the ever-dreaded game of phone tag to confirm the details of this relief, proving that communication between borrowers and servicers is undeniably complicated.

“The promise of a more efficient, effective system through 41 ‘objective, measurable service-level agreements’ should mean easily making payments, staying up-to-date on relevant changes, and receiving prompt customer service when necessary.”

2. This overhaul won’t fix everything.

While the overhaul will move our student loan system closer to an ideal state, it’s unclear what to expect when we get there. FSA’s proven track record of failing to hold their servicers accountable begs the question: how plausible is all of this?

In a current system that lacks transparency and accountability, we can’t expect these problems to disappear overnight. The last overhaul in 2015 was filled with a range of sloppy, patchwork practices, according to a report from the Consumer Financial Protection Bureau.

“As with any change to a system that has been around for a while, there are bound to be hiccups. The actual mechanics of setting up accounts with new servicers may vary depending on the servicer, and migration of the data for tens of millions of student loan customers may present unique challenges,” said Brainard.

[Read: Student Loans 101: Vocabulary]

3. You can still take active steps to protect your rights as a borrower.

If you have loans, there’s a good chance you’ll be impacted by the servicing overhaul. But there are some things you can do to make sure the transition is as smooth as possible.

Brainard explained that borrowers currently serviced by Edfinancial Services, LLC and MHELA aren’t likely to face interruptions. But those currently serviced by any outgoing servicer such as Nelnet or Great Lakes should look for communication about reassignment to another servicer as they come online.

Borrowers will have to become accustomed to a new online payment portal environment should payments flow directly through studentaid.gov in the future.

4. You should still keep a record of everything (yes, everything).

With the present lack of accountability for errors, the last thing you want is to find yourself behind on payments or scrambling to cover late fees. Most online servicing platforms allow you to download the records you need.

Keep a record of:

  • payment records
  • any communications with your servicers about changes with your loan
  • confirmation of adjusted payment plants
  • documentation needed to sustain your public service loan forgiveness

5. Keep paying attention.

Ultimately it’s up to you to make sure nothing falls through the cracks. If your payments are on autopay, check that they go through every month. And if you’re shuffled to a new company, make sure you set up autopay again.

It’s also a good idea to keep an eye on your credit report. If there’s an error in processing your payments, you could see a considerable impact on your score. Monitoring these errors will save you a lot of heartache in the long run.

[Read: Will Consolidating Student Loans Help Your Credit Score?]

6. Keep being your own advocate.

Brainard said the most important thing is to continue making payments. “Borrowers must be their own best advocates. In other words, over-communicate with all parties until you are with your new servicer, automatically making payments on a plan you understand and that fits your specific financial goals.”

There’s a lot of positive change coming to the federal student loan landscape, though there are still things that will stay the same. It will always be important to familiarize yourself with the terms of your loans and prioritize payments on time to avoid a burden to your wallet.

Experts cited

Derek Brainard, MBA, AFC, CRPC

Derek Brainard is the Director of Financial Education at AccessLex Institute and has served in both the private financial services sector and higher education. As an adviser, financial literacy coordinator, speaker, and writer, Derek’s message on the importance of financial capability has reached thousands of people across multiple demographics.

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