When Your Student Loans Are Sold: What You Need to Know

Lenders can sell your loans whenever they want, so it’s important to have some safeguards in place. Here's what you need to know.

While I was working on paying off my student loans, I checked my account balances weekly. One day, I logged into my account and the $10,000 I had in outstanding loans had disappeared.

At first, I was elated. Had some generous benefactor swooped in to pay off my debt? Then I realized I couldn’t be nearly that lucky — so I tried to figure out what happened.

Many people, including a financial professional, told me not to look a gift horse in the mouth and ask too many questions. But I didn’t think loan servicers were likely to have forgotten about my debt.

Tracking Down My Loans

I tried emailing my loan servicer to find out what happened, but didn’t get a response for a few weeks. I was afraid my loan payments would become due and I wouldn’t know where to make payments, so I decided to check my credit report to see if I could find my loan. (You can view two of your credit scores for free on Credit.com.)

Sure enough, my credit report showed my loan had been moved to a new loan servicer. When I reached out to the issuing bureau, they said my old lender had mailed me a letter as notice of the change, but I never received a letter.

It’s possible they had an old address on file, or I accidentally tossed it in the trash, but I’m glad I pursued it. If I hadn’t continued digging, I never would have found out and could have defaulted on my debt.

What Happens When Your Student Loan Debt Is Sold

My situation is not unique. Federal and private student loans can be sold to other lenders at any time. There’s a market of organizations that specialize in buying and servicing student loans.

When your loan is sold to a new lender, you’re indebted to the new owner of the loan. You have no more contact with the old one. While the new servicer might offer some new benefits, the basics of your loan — such as the interest rate or repayment term — will not change.

The original lender will send you a letter notifying you of the upcoming switch. Then, you’ll get a second letter from the new lender that explains why your loan was sold, who your new loan servicer is and how to make payments.

How to Protect Yourself

Because lenders can sell your loans whenever they want, it’s important to have safeguards in place. You don’t want to miss a notification and end up falling behind on your payments. Here’s what you can do to protect yourself:

Update your contact information. If, like me, you’ve moved around, it’s important to make sure your lenders have your most recent contact information. Log in regularly and check to see they have the right mailing address and phone number.

Read all mail. Read every piece of mail that comes from your lender. Don’t just assume it’s a monthly statement and toss it. It could be an important notification.

Check the notification for accuracy. If you receive a notice that your loan is sold, make sure the balance and terms of your loan are accurate.

Contact your lender with any problems. If you can’t find your loan or make payments, call your lender’s customer service line right away.

Track your loans with the National Student Loan Data System (NSLDS). The NSLDS is a database that tracks your federal loans. It will list which loans are under your name and the loan servicer for each one.

Check your credit report. If you aren’t sure if your private loan has been sold, you can find out by checking your credit report for free at AnnualCreditReport.com. It will list all your current loans and who owns each debt. Once you have the name of the lender, you can contact them to get your login information and start making payments.

By keeping your information up to date and checking your account regularly, you can prevent any confusion when managing your loans.

What to Do If You Hate Your New Loan Servicer

In my case, my new loan servicer was an improvement over the old one. Their online platform was easier to use and their customer service department was more responsive.

Some people don’t have the same experience. The Consumer Financial Protection Bureau reported there are thousands of calls each year from consumers about their student loan servicers.

If you have problems with your new loan servicer, such as delays in getting a response for an issue you reported, here’s what you can do:

Contact the student loan ombudsman. If you can’t get your problems fixed, you can contact the student loan ombudsman. An ombudsman is a neutral third party that will work with you and your lender to identify a solution.

Refinance your loans. If you’re simply looking for more features or want to reduce your interest rate, refinancing your student loans might be a smart approach. If you refinance, you’ll work with a private lender to take out a new loan for the amount of your old one. You can get a different repayment term, monthly payment and interest rate.

Managing Your Loans

The student loan system can be incredibly complex. Trying to navigate it can be difficult, especially since your loans can be sold to a new lender at any time.

You can protect yourself by being proactive and monitoring your credit report. If you hate your loan servicer, know that you’re not stuck with them. You can identify a resolution or get a whole new servicer who offers more favorable repayment terms.

For more information on shopping for a new loan, here’s what to do if you hate your loan servicer.

Image: kajakiki

The post When Your Student Loans Are Sold: What You Need to Know appeared first on Credit.com.

The Way You Pay Your Student Loans Is About to Get Easier… in 2020

Earlier this week, the Department of Education announced that it’s taking steps toward making a web portal that will make paying student loans a little bit easier. And if you’re one of the 43 million Americans who understand the turmoil of student loans, any relief is welcome.

But don’t hold your breath — this update won’t be happening any time soon.

According to an email from a U.S Department of Education spokesman, the process of developing the portal is still under discussion and they won’t award a new contract to a management team for a while, as the existing servicing contracts don’t expire until 2019.

Improvements Are Coming...

The spokesman told Credit.com the department used community and administration feedback from the past 2 years to conclude they needed to make this change. This input helped establish the goal of the new platform, which is to create a unified experience for borrowers, giving them a single point of entry (instead of a separate one to repay each lender) to manage their loans. This is expected to include the ability to make payments, review repayment options and find general information about student loans.

The announcement of this new portal came via a Department of Education blog post and follows years of complaints about the confusion that comes along with repaying these loans. The new platform is reportedly going to simplify the process of paying student loans, as well as to provide uniform information from all lenders to help simplify the details and avoid misinformation.

Currently, anyone paying student loans has to log into their loan servicer’s website to make payments, but many borrowers have multiple loans with different servicers. Adding to the potential confusion around student loans, loans can be transferred to a different servicer, so borrowers can easily lose track of whom they’re currently supposed to pay. The new platform will reportedly aim to limit this, giving borrowers an easier main point of contact to deal with instead of trying to keep it all straight themselves.

According to the blog post, written by U.S. Under Secretary of Education Ted Mitchell, the platform will “make sure all borrowers are getting the customer service they deserve, by challenging the industry to compete to provide world-class service to our Direct Loan borrowers.”

The department is going to set up standards for what lenders should be telling borrowers about the repayment programs. A Consumer Financial Protection Bureau report from September showed that there are often servicer errors that hurt students, like not fully explaining options or setting someone up with a different plan than agreed upon. The new platform may be able to reduce the risks of these sorts of errors happening.

…But Not for a While

Once this platform is finalized and gets up and running, which is likely not going to be for at least another 4 years, borrowers will be notified of the change and redirected to the single portal to repay their debts. The spokesman said the Education Department will then be the common brand for these communications and borrowers will no longer have to to use multiple outlets to make payments.

Until then, it’s business as usual for repaying any student loans you may have. While paying them all in one place one day may add an element of convenience, it doesn’t make the dread of having to pay these loans any better. However, it’s important to continue doing so, on-time, so you don’t harm your credit. To see how your student loans are affecting your credit, you can check out your free credit score, updated monthly, on Credit.com.

More on Student Loans:

Image: Barry Austin Photography

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