What can often times cause great distress for borrowers is when their loan is transferred. They often times think this is because something terrible happened. In many borrower’s mind they were transferred as a punishment. If your loans are owned by the Department of Education, this certainly is not the case!
The Department of Education contracts many servicers because it would be impossible for just one to handle all the student loans that exist. There are various things that happen that will cause your loan to get sent from one servicer to another but please be aware none of it is your doing. Some examples include:
1) A loan servicer shuts down. This rarely happens but happened in the summer of 2013 when Direct Loans stopped servicing student loans. All these borrowers were then transferred to other servicers.
2) The DOE is attempting to get all your loans in one place. If you have two loans with Sallie Mae and one loan with Great Lakes, the government may move your one Great Lakes loan to Sallie Mae in order to make it easier and more convenient on you.
3) Oversaturation. Loans are constantly coming in and leaving the system. If there is a skewed number where one company has close to or over the max number loans it can handle while another is under its threshold, the DOE may transfer to even this out. Again this is done to benefit the borrower.
The question we always got is “Can they do this without my permission?” Well the answer is moot because you gave them your permission. Whenever you signed your Master Promissory Note to receive your loan, part of the agreement was the DOE has the power to move the loan between its servicers.
But don’t worry it usually is a very small difference for the borrower. If the loan is delinquent at time of transfer because a payment wasn’t sent over yet, a transfer forbearance will be placed. These payments that get caught in limbo will be sent over to your new servicer and backdated. In addition since these servicers play by the same rules, you should notice little to no difference on how things are run. In addition things like your payment plan, terms, and Direct Debits usually transfer over as well.
The great combatant to fear is knowledge. Getting transferred can be scary but almost always turns out just fine for the borrower!