What Student Loan Servicers Quitting Means For Consumers

You may have heard recently about some student loan servicers quitting. If you have outstanding student loans, you might wonder what that means for you as a consumer. 

We’ll discuss that in the following article. We’ll also cover what a student loan servicer is and why so many of them are getting out of that business at the moment.

What is a Student Loan Servicer?

Student loan servicers are organizations or companies that collect payments on student loans. They also respond to customer service inquiries, process payments, maintain loan records, and so forth. If you have taken out loans to pay off debt that isn’t related to higher education, you’re not going to deal with the same companies that you would as a student borrower. 

There are only a few principal companies that do student loan servicing. If you took out a government-issued student loan, your student loan servicer was probably one of the “Big Four,” which are Great Lakes, Navient, Nelnet, and FedLoan Servicing. The main nonprofit ones are OSLA, MOHELA, Granite State, Cornerstone, and HESC.

Why Are Some of Them Quitting?

Lately, you may have heard that three of the student loan servicers that handled both government-issued and private loans are getting out of the business. Those three are Navient, Granite State, and FedLoan Servicing.

According to a Navient spokesperson, these entities believe that the government was enacting policies that transferred too much risk to the servicers. The company heads thought that the terms and rates were effectively below cost to everyone. 

Several of the student loan servicers believed the system caused confusion, had significant communication challenges, and lacked standardization. If you’re a consumer, though, what does it mean for you that several of these enormous entities are getting out of the business?

The Probable Impact

Three major student loan servicers dropping out of the market soon will impact nearly 10 million borrowers. However, the Department of Education’s Federal Student Aid office says that’s a positive thing. They claim that more stringent restrictions will prevent servicers from misleading borrowers about their options and harassing them.

The borrowers these changes will impact are also consumers. Many of them are now former students. They either got the college degree they sought, and now they’re a part of the job market, or dropped out, but still have to pay back their student loans.

Either way, most borrowers and the remaining student loan servicers seem optimistic about what these proposed changes mean. The servicer shuffling that will take place should streamline the loan payback process. Doing so should reduce the average consumer and borrower’s stress level moving forward. 

There’s Reason for Optimism

Several student loan servicers dropping out of the market is probably not a major cause for alarm if you’re one of the nearly 10 million Americans about to be impacted. The servicers seem to resent the US Department of Education for the changes they want to make. Department of Education reps are pointing the finger back at the servicers for their harassment and poor customer service.

You do not need to concern yourself with that, though. What’s happening are likely positive developments for current or former students, but also consumers in general. That’s because once you get assigned a new student loan servicer, they will need to adhere to stricter regulations. You should have a much better grasp of how much money you need to pay back and exactly when that needs to occur.

You’ll also be able to avoid poor servicing practices, which means fewer headaches. And you can hopefully get a much more accurate overall picture of your finances. With money tight for some individuals and families right now, clarity and transparency are significant benefits.