Navigating Student Loan Servicing: A Comprehensive Guide
Student loan servicing can often feel like navigating a complex maze. This article aims to provide clarity and guidance, especially in light of recent transitions in the student loan servicing landscape. Understanding the roles of loan owners and servicers, staying informed about servicing transfers, and knowing your options are crucial for effectively managing your student loans.
Understanding Loan Servicing
The loan owner is the entity that holds the loan agreement and has the right to collect from the borrower. On the other hand, a loan servicer handles the day-to-day details on behalf of the loan owner. These details include collecting and processing payments and answering borrower questions. As a loan servicer, MOHELA works with borrowers on repayment plans and assists with other issues related to their student loans.
The Transition from Navient to MOHELA
In the student loan servicing world, changes are not uncommon. Servicing transfers are a normal business practice that happens from time to time. Recently, a significant shift occurred with MOHELA replacing Navient as the servicer for many student loans. It's important to note that MOHELA is not purchasing or merging with Navient.
For borrowers, this means that they now work with MOHELA instead of Navient. While not much is changing (e.g., account number, contact information), it's understandable to have questions during such a transition.
This change has been in the works throughout a certain period, with several communications to let borrowers know about the change. Loans officially transferred to MOHELA on a specific date, and borrowers can now access their online accounts at servicing.mohela.com.
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Key Aspects of the Transition
- No Action Needed: Borrowers generally don't need to take any specific action during the transfer.
- Auto Pay: Auto Pay enrollment automatically transfers to MOHELA.
- Repayment Plans and Borrower Benefits: Any repayment plan options available and borrower benefits provided in the loan agreement will continue at MOHELA.
Making Payments to MOHELA
Borrowers should continue to use the same address to send payments. However, they'll need to update who it’s addressed to on their check - MOHELA. For all questions related to loans, borrowers can visit servicing.mohela.com. MOHELA has also sent a welcome letter letting borrowers know their loans have officially transferred. Borrowers can begin to access their MOHELA online account, begin making payments to MOHELA, and contact MOHELA with any questions about their loans.
Navient's Exit from Student Loan Servicing
Navient, a financial services company, was a prominent federal and private student loan servicer for nearly a decade. However, the company faced a lawsuit from the Consumer Financial Protection Bureau (CFPB) for federal loan mismanagement.
Navient stopped servicing Direct Loans with the Department of Education on a specific date. Direct student loans formerly serviced by Navient were transferred to Aidvantage - another student loan servicer. A settlement reached by Navient and the CFPB on a specific date means the servicer is no longer legally allowed to service federal student loans. In addition, Navient must pay a certain amount in restitution and penalties, including a certain amount for affected borrowers and a certain amount to the CFPB’s victim relief fund.
Going forward, the company plans to cut some of its services as a part of a new strategic business plan. Navient announced plans to sell its healthcare services businesses as a part of its plan to simplify operations.
If borrowers had FFELP loans serviced by Navient, the process to transfer servicing to MOHELA began on a specific date, with MOHELA officially taking over on a specific date.
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Understanding Interest Rates
The interest rate on a loan, whether fixed or variable, is governed by the terms of the loan agreement. The servicer must adhere to those terms when servicing the loan. Interest rates on federal student loans are set by Congress, whereas interest rates on private loans are set by the lender at the time of loan origination.
Addressing Potential Issues
It’s important to note that MOHELA has faced some of its own legal allegations in recent years. The American Federation of Teachers filed a lawsuit against the servicer alleging harm to borrowers through loan mismanagement.
If borrowers face issues with Navient or any loan servicer, they should reach out for help.
Exploring Alternative Servicing Options
If borrowers don’t want their loan serviced by MOHELA or Navient anymore, they might consider refinancing their student loans with a different lender. Refinancing makes the most sense when they can get an interest rate lower than their current one.
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