The U.S. Department of Education made major changes to the federal student loan management system last year Next Generation Federal Student Aid Initiative that aims to improve the borrowing and repayment experience. The system became a single central platform.

To update: On February 21, 2021, optimized and personalized improvements to the entry and exit counseling processes were published on Also, a Spanish borrower defense form has been added and features have been added to the myStudentAid mobile app.

To replace the old service technicians, five new companies will take over most of the federal loan portfolio:

  • EdFinancial Services
  • FH Cann & Associates LLC
  • MAXIMUS Federal Services Inc.
  • Missouri Higher Education Loan Authority (MOHELA)
  • Texas Guarantee Student Loan Corporation (Trellis Company)

Here’s everything we know about the federal new student loan companies

1. They should be more accountable and easier to use.

According to DeVos, the new contracts are “another important step in our commitment to improving customer service and making our contractors accountable for their performance.”

In the past, student loan service providers have been screened for poor lending practices and violations of state law. There isn’t much accountability for servicers right now, nor is there any standardization – all tools and websites are unique to everyone. With nine different servicers and four operating platforms, there is plenty of room for error.

[ Read: The Best Student Loans of 2021 ]

Borrowers who are spread across multiple providers will have to bend back to keep up. Right now, transferring your loans is a complicated process with even less protection. The jumble of various policies and procedures related to payment and processing makes it nearly impossible for borrowers to get away unscathed.

“Simplifying and standardizing the historically complex and disjointed environment for servicing student loans should help borrowers manage repayment with fewer headaches,” said Derek Brainard, director of financial education at AccessLex Institute.

The coronavirus pandemic and the executive order to postpone interest and postpone loan payments through September 30 just take a look at the nesting of our system. Borrowers are now forced to engage in the ever-dreaded phone-tag game to confirm the details of this relief, proving that communication between borrowers and servicers is undeniably complicated.

“The promise of a more efficient and effective system through 41 ‘objective, measurable service level agreements’ should mean simply making payments, staying up to date on relevant changes and receiving fast customer service when needed.”

2. This overhaul won’t fix everything.

While the overhaul will bring our student loan system closer to ideal, it is unclear what to expect when we get there. The FSA’s proven track record of failing to hold its servicers accountable begs the question: How plausible is all of this?

In a current system where there is a lack of transparency and accountability, we cannot expect these problems to go away overnight. The last overhaul in 2015 involved a number of sloppy patchwork practices, according to a report by the Consumer Financial Protection Bureau.

“As with any change to a system that has been around for a while, hiccups can occur. The actual mechanisms for setting up accounts with new servicers may vary by servicer, and migrating data for tens of millions of student loan customers can be particularly challenging, ”said Brainard.

[Read: Student Loans 101: Vocabulary]

3. You can continue to take active steps to protect your borrower rights.

If you have credit, there is a good chance that the maintenance overhaul has affected you. However, there are a few things you can do to ensure that the transition goes as smoothly as possible.

Brainard stated that borrowers currently served by Edfinancial Services, LLC and MHELA are unlikely to experience any interruptions. Those currently being served by an outbound servicer such as Nelnet or Great Lakes should look for a notification of reassignment to another servicer as soon as they come online.

Borrowers will have to get used to a new online payment portal environment if payments are to be made directly via in the future.

4. You should still be recording everything (yes, everything).

Given the current lack of accountability for errors, the last thing you want is to be behind with payments or covering late fees. You can download the required data sets from most online service platforms.

Keep records of:

  • Payment records
  • any communication with your servicers about changes to your loan
  • Confirmation of the adjusted payment systems
  • Documentation needed to keep your public loan in good shape

5. Keep paying attention to it.

Ultimately, it’s up to you to make sure nothing falls through the cracks. If your payments get paid automatically, check to see that they are executed every month. And if you move to a new company, make sure to set up auto payment again.

It’s also a good idea to keep an eye on your credit report. If there is an error processing your payments it could have a significant impact on your score. Monitoring these errors will save you a lot of heartache in the long run.

[Read: Will Consolidating Student Loans Help Your Credit Score?]

6. Continue to be your own lawyer.

Brainard said the most important thing was to keep making payments. “The borrowers have to be their best lawyers. In other words, communicate excessively with all parties until you are with your new servicer and automatically pay according to a plan that you understand and that fits your specific financial goals. “

There are many positive changes in the federal student loan landscape, although there are still things that will stay the same. It is always important to familiarize yourself with the terms of your credit and prioritize on-time payments to avoid putting a strain on your wallet.

Experts cited

Derek Brainard, MBA, AFC, CRPC

Derek Brainard, MBA, AFC, CRPC

Derek Brainard is the Director of Financial Education at the AccessLex Institute and has worked in both the private financial services sector and academia. As a financial literacy advisor, coordinator, speaker, and writer, Derek’s message about the importance of financial literacy has reached thousands of people in diverse communities.

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