Are you receiving notices from any of these five companies? If not yet, you likely will in the next few months.
- EdFinancial Services
- F.H. Cann & Associates
- Trellis Company
If so, this is because they all were awarded new contracts by the Department of Education starting in December 2020. Then COVID hit and a decision was made to extend the contracts with the existing big four servicers, Fedloan Servicing (PHEAA), Great Lakes, Navient and Nelet until next December 2021. Other existing contracts have been extended as well such as CornerStone, Granite State – GSMR to name a couple.
But in the meantime, these new batch of servicers are getting up to speed, creating new systems to combat cybersecurity concerns. Also a new system is being created called NextGen, which is supposed to be a all inclusive platform where borrowers can manage all of their payments. Right now, borrowers are forced to deal with multiple servicers, and even debt collector firms if they should default on one or more loans. There is no standardized platform in existence now.
The Department of Education was heavily criticized in an Attorney General investigation about the high number of errors that its federal loan servicers were committing each and every month. In fact, these error rates were not just 1-3%, but rather 61%. That’s crazy high. You know when you call your servicer and you get 3-4 different answers. Maybe one of the answers is correct, but which one exactly?
So in response, the Department of Education has taken action to clean house – I commend them for doing something to fix this problem although they certainly took their time.
The new plan is to replace a system that “can lead to customer confusion and inconsistent operations.” More accountability is the new goal. “The legacy servicing contracts do not contact adequate incentives to reward servicers when they manage borrowers’ accounts successfully, and they do not allow for appropriate consequences to be applied to loan servicers that fail to meet contract requirements.”
The funny thing is we felt that Great Lakes was doing a pretty good job for the most part. Except for Public Service Loan Forgiveness that is – there we have a class action lawsuit pending.
It seems that every servicer has a specialty of some sort. Did you know that you can pick your new servicer when you consolidate an older FFEL loan to a newer Direct loan? And that newer Direct loans will be the favored loans for future interest waiver, principal forgiveness, and reduced income driven plans? There’s no better time than now to change up your loan types for the newer ones to take advantage of existing and potentially new programs down the road.