Federal student loan servicers stand between you and the federal government – the government hands you the loan, and the servicer is pretty much the middleman. We’re going to let you in on a little secret though…
Want to get rid of your loans? Get to know your servicer.
Your student loan servicer collects all your payments, keeping track of whether these payments are made on time. Servicers can also help borrowers to switch over to a new repayment plan, enter into a forgiveness program, and postpone payments you’re not able to make yet.
A student loan servicer’s job is to help you keep your loans in what they call “good standing.” This term generally describes how well you’ve done in paying off your loans on time, though it will vary from lender to lender. It might depend on how many times you’ve been late on a payment, and you may be able to remove your “delinquency” status simply by bringing the account current.
Servicers are private companies, so it’s possible they may offer you some payoff choices that aren’t ideal (for you, that is). Let’s talk about what you can do to find out who your servicer is and whether they’re right for you.
Finding your loan servicer
If your loan payments haven’t kicked in yet, or you simply don’t know who your servicer is, you can check by logging into My Federal Student Aid. You’ll have to create an FSA ID to do this though. Once you’re in, you’ll be able to identify your servicer, view loan details, or sign up for various payment plans.
This is the first step toward getting ahead of your loans. Note that you can reach all loan servicer contact centers by phone at 1-800-4-FED-AID. Usually, servicers offer a certain amount of help and services to borrowers, but if you’re having difficulties, it could help to switch servicers. If you’d like to switch, the rest of this article covers 4 of a servier’s core roles you need to know in order to pay off your loans ASAP.
Student Loan Servicers: Core Roles
1. Collect and keep track of student payments
Servicers handle loans on behalf of both the federal government and private lenders (depending on the servicer). You may have federal student loans, but you will still be working with a private company to make your payments.
After your first federal loan is paid out to you, your servicer will usually contact you. If you register for an account on the servicer’s website immediately, you will be able to keep track of:
- How much money you’ve received
- The interest that adds up while you’re in school
An online account can also be used to pay off any interest that has grown before it gets added to your total balance (after the grace period is over).
Six months after leaving school (by graduating or dropping out), your first beautiful bill shows up. Welcome to adulthood!
If you sign up for automatic monthly payments, you’ll be less likely to fall behind on your loans. However, make sure you’ve got enough money in your bank account each month to cover the cost. That might sound a little condescending, but it’s a surprisingly common mistake for recent graduates to make. Better safe than sorry!
2. Assist Students in Choosing/Switching Repayment Plans
Unless you pick a different one, your servicer will put you on the “10-year standard student loan repayment plan.” This standard plan divides your balance into 120 fixed monthly payments. Of course, if you have a lot of debt, this might be tough to afford…
Part of a student loan servicer’s job, however, is to help you figure out whether you are eligible for an income-driven repayment plan, which takes your earnings into account when determining how much you pay per month. You can use the government’s loan simulator tool to figure out what you’d pay on an income-driven plan.
And if you decide to switch plans, your servicer processes the request and guides you through the necessary paperwork.
3. Offer Customization of Student Loan Payments
By the time you’re earning enough to pay extra on those loans, it’s important to be smart about it and focus on the ones with the highest interest. This will help you save money in the long run. And if you can pay more than your scheduled payment, it will reduce your overall balance and the amount of interest on that loan. So if it’s feasible, pile a bit more than the base amount in each payment.
That said, when you do this, contact your servicer and tell them to apply that extra money to the current payment – otherwise, they might dunk the surplus into the following month’s bill instead.
4. Process Deferment and Forbearance Requests
While you’re in the process of repaying your student loans, there might be times when you simply can’t afford a payment (or any payments). Don’t worry! Your situation is far from hopeless. Let your loan servicer know you can’t pay ASAP. You can apply for deferment or forbearance, which are both forms of temporary loan forgiveness and extension when you’re having legit financial difficulties.