Yahoo Finance Student loan repayments start in October: Know your servicer sooner rather than later
Interest resumes building on federal student loans beginning in September after more than three years at 0% during the pandemic-related payment pause. But for many college borrowers restarting monthly payments in October won't be as simple as just sending money to the same old loan servicer from a few years back.
Many who graduated from college or quit in the past few years never even made a payment, so they probably don't know who is servicing their federal student loans.
It's time to pay attention to the paperwork, the emails and do a little prep to make sure there aren't any glitches as payments restart on more than 40 million in federal student loans. The restart is a done deal because it was part of the terms of a debt ceiling bill approved by Congress to avert a first-ever default.
Many student loan bills should start arriving in mid-September, but some borrowers could see their bills arrive by early October. Billing statements are to arrive at least 21 days before your payment is due in October.
At least 30 days before your first payment is due, you're to be informed of how much you'd owe each month.
But what if the servicers somehow can't find you?
The restart could be tricky for some because about 44% of borrowers have a new student loan servicer and won't be dealing with the same servicer they had before the COVID-19 pandemic pause began in March 2020, according to Mark Kantrowitz, a student loan expert and author of "How to Appeal for More College Financial Aid."
If your servicer has changed, you need to know that sooner rather than later as you prepare for COVID-19 relief for student loans to end this year.
Student loan borrowers began receiving emails in late July that indicated the name of their loan servicer. Those emails are pretty helpful and include a link to the servicer's website. If you can spot that email, you're off to a better start for figuring who is handling your payments.
The transition to making payments could be daunting. Borrowers shouldn't just wait until they receive a bill, said Rachel Rotunda, director of government relations for the National Association of Student Financial Aid Administrators, a nonprofit group that represents more than 29,000 financial aid professionals at about 3,000 colleges, universities, and career schools nationwide.
After all, the repayment system is restarting for tens of millions of borrowers at once, she said, which could bring its own unique challenges.
Borrowers who were in school at the start of the pandemic or had recently graduated, Rotunda said, might want to take extra care to make sure their contact information is updated. These borrowers never have made a monthly payment or had contact with their servicer because their federal student loans were covered under the CARES Act student loan forbearance program.
It's a good time to reevaluate your budget, find out who is servicing your federal student loans and figure out how to select the right repayment plan now.
Will Great Lakes continue to service student loans?
Borrowers with Great Lakes Higher Education will have their loans serviced through Nelnet. All Great Lakes student loans have been transferred to Nelnet.
Nelnet's website notes that the company is in the process of "obtaining payment histories from Great Lakes and making them available to view through your Nelnet.com account in the coming weeks." Borrowers are advised to look for new documents in their Inbox once their payment history becomes available. These borrowers are encouraged to register an online account with Nelnet. Calling Nelnet on Wednesday, the recording noted that the high call volumes meant a 30-minute wait time at that point.
What will happen to my Navient loan?
Borrowers who dealt with Navient − which cut ties with the U.S. Department of Education and will no longer be servicing federal student loans − have been transferred to Aidvantage. "If your student loans recently transferred to Aidvantage, your repayment plan or monthly payment amount may not appear yet when you log in to your online account," the Aidvantage website notes.
Aidvantage said in late August that it's working to complete the transfer and update accounts. "Your loan information will be in your account before you get your first bill," the website said.
Who took over Granite State loans?
All borrowers, according to the Education Department, have been transferred from Granite State to EdFinancial Services.
Who is my student loan servicer?
The National Association of Student Financial Aid Administrators has an online Student Loan Repayment Toolkit to help prepare for repayment after the more than three-year hiatus. See www.nasfaa.org/repayment_toolkit for tips.
To find your servicer, go to StudentAid.gov to confirm your loan servicer in the “My Loan Servicers” section of your account dashboard.
To do that, you must have or create an FSA ID to access your account with Education Department's office of Federal Student Aid. Visit https://studentaid.gov/fsa-id/create-account/ to find or create an FSA ID. You'd need your Social Security number and your email and/or mobile phone number.
Your FSA ID includes a username and password, which will allow you to access your financial aid information. It's same ID you used to complete your Free Application for Federal Student Aid or FAFSA.
You can call the Federal Student Aid Information Center at 1-800-433-3243 for information about your loan servicer. But wait times are extremely long.
StudentAid.gov has a list of loan servicers for federal student loans under the heading "Who's my loan servicer?"
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Log in before the bill arrives
When you confirm your loan servicer, financial aid experts advise that you create an account or log into an existing one via the loan servicer’s website. Make certain to review and update your email and mailing address. You want your loan servicer to be able to reach you.
Sign up for automatic payments
Even if you were making payments before the pause began in 2020 and had signed up for automatic debit, you now must reauthorize or select automatic debit through your loan servicer account to allow payments going forward to be automatically withdrawn from your bank account every month.
How to call your servicer
It's best to first navigate your way through the StudentAid.gov website, update your contact information and review your emails to prepare for the upcoming student loan bills ahead. If you have questions, though, the Education Department has listed phone numbers for loan servicers on its website. The contact information is:
Great Lakes Educational Loan Services Inc., 1-800-236-4300
Edfinancial, 1-855-337-6884
MOHELA, 1-888-866-4352
Aidvantage, 1-800-722-1300
Nelnet, 1-888-486-4722
OSLA Servicing, 1-866-264-9762
ECSI, 1-866-313-3797
Default Resolution Group, 1-800-621-3115 (TTY: 1-877-825-9923 for the deaf or hard of hearing)
What is the SAVE plan?
More than 20 million borrowers could benefit from a new income driven repayment plan called SAVE, according to estimates from the Biden administration.
Under this plan, the payment will be 10% of disposable income for those who qualify. Loan balances won't grow due to unpaid interest if you keep making the payments under SAVE. Borrowers later have to pay just 5% of their discretionary income toward undergraduate student loans, rather than 10%, starting July 1, 2024.
There are four different income-driven repayment plans that can reduce monthly payments. A loan simulator at StudentAid.gov can help you review options. You'd apply for the SAVE plan at StudentAid.gov/SAVE and you can do that now.
More borrowers will be able to get their federal student loan payments down to $0 a month under the SAVE plan, if their income is low enough. If you're worried about October, study your options now and move quickly.
How do I know when my student loan bill is due?
Many borrowers will see those bills in a few weeks. Even so, borrowers are encouraged to log into their servicer accounts to update any contact information, said Rotunda, of the financial aid administrators' group.
"We know a lot of folks have moved or they have a different address," Rotunda said.
The StudentAid.gov website has a special page for borrowers who are repaying their student loans for the first time after the payment pause. Your first payment is due in October 2023 unless you left school within the past six to nine months and are still in your automatic grace period.
For borrowers who are just starting payments, it may be important to review your payment options. "If you don’t select a plan," the Education Department notes, "you will be enrolled in the Standard Plan by your servicer, where payments are based on your balance size and not your income and family size."
Monthly payments under the 10-year standard plan are larger than income-driven plans, like SAVE.
It's important, Rotunda said, to pay attention to what information and communication you're receiving now − including any billing statements that arrive in September. The complete lack of communication could indicate a problem ahead.
What is the usual interest rate on a student loan?
Interest rates for federal student loans resume in September but the rates can be all across the board, depending on when you took out the loan. You should be able to find your rate at StudentAid.gov.
Since 2013, Kantrowitz said, each year's federal student loans have had a new fixed interest rate.
The lowest interest rate was 2.75% for loans in 2020-21 for undergraduate Federal Direct Stafford Loans, he said, and the highest was 5.498% for the Stafford loans in the 2023-24 academic year.
Before 2013-14 school year, the highest interest rate on Stafford loans was 6.8% and 8.5% on federal PLUS loans. Before 2001-02, the highest interest rate was 8.25% on federal Stafford loans and 8.99% on Federal PLUS loans.
If you sign up for autopay, the interest rate on your federal loans will be cut by a quarter of a percentage point. Otherwise, there is no way of getting a lower interest rate, Kantrowitz said, other than refinancing into a private student loan.
Should you refinance to a private loan? Maybe or maybe not. You might refinance if you happen to have excellent credit and you obtained your loans decades ago when interest rates were higher. But you do give up opportunities for loan forgiveness or lowering your payments through income-driven repayment plans by refinancing federal loans into private loans.
Will some student loans be automatically forgiven?
Yes, but not as many as you think. And we're talking about some pretty old loans.
The Education Department has begun notifying about 800,000 federal student loan borrowers who will see their student loans automatically forgiven. These borrowers are likely in their 40s and 50s, Kantrowitz said, and had participated in an income-contingent repayment plan for years. They probably had been making payments for 20 years or 25 years with the goal of having their debt forgiven ultimately.
Some payments weren't properly credited and mistakes were made, according to the administration. Borrowers with Direct Loans, Federal Family Education Loans held by the Education Department, as well as Parent PLUS loans, are covered if they were in these type of repayment plans for decades.
No action needs to be taken at this time for these loans to be forgiven.
"If the debt is forgiven, they will not need to make a payment in October," Kantrowitz said. "But they should wait to see if their loans are forgiven before stopping payments."
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on Twitter @tompor.
This article originally appeared on Detroit Free Press: Find out if student loan servicer changed before payments restart
