Federal student loan servicer transfers: What borrowers must know to stay vigilant

Federal student loan borrowers may soon see their accounts transferred to new servicers as part of the US Department of Education’s effort to improve efficiency and customer service. The move, however, has raised concerns over potential lapses in communication, account errors, and borrower confusion.

Why the changes are happening

The Department of Education said accounts tied to programs like Public Service Loan Forgiveness (PSLF) will be shifted from MOHELA to other servicers. Similar transfers have occurred over the years when contracts or loan portfolios expire. Officials say the transitions aim to make repayment easier, but past transfers have sometimes caused problems, including missing payment history and delays in reporting borrower accounts.

Risks for borrowers

Experts warn that changes in servicers may carry several risks, including:

Lost payment history, potentially slowing progress toward forgiveness programs

Credit report errors, such as duplicate or misclassified accounts

Interrupted services, including auto-pay cancellations or billing issues

Confusion over payment plans, particularly for income-driven or PSLF borrowers

How borrowers can prepare

Financial advisors recommend the following steps to minimize disruptions:

Save records: Keep duplicate payment statements and communications from your current servicer.

Verify accounts: Check StudentAid.gov after the switch to confirm account details.

Check repayment plans: Ensure income-driven or forgiveness plans transfer correctly.

Re-enroll in auto-pay: Automatic payments may not carry over, so reinstate them with the new servicer.

Monitor credit reports: Look for duplicates or incorrect balances.

Stress amid transition

For many borrowers already facing financial strain, the transfer adds another layer of stress. Supporters emphasize that while servicer changes are largely beyond borrowers’ control, proactive steps can prevent minor administrative errors from turning into major setbacks.

The Department of Education says it will monitor the transfers to minimize disruptions, but with millions of accounts affected, experts say borrowers must stay engaged to protect their repayment progress.

What to expect during a transfer

Borrowers are typically notified at least two weeks before the transfer via email or letter, which includes the new servicer’s contact information.

Former servicers may show loans as “paid in full” temporarily; this does not indicate forgiveness.

New servicers will load accounts into their system and provide instructions for account access and services, such as auto-pay and online management.

Loan status, including deferment or forbearance, remains unchanged during the transfer.

Timeline for updates

New servicer information should appear on StudentAid.gov within 7–10 business days after the account is fully loaded, though delays can occur. Payment histories may take up to 30 business days to reflect completely.

Steps for borrowers

Contact the new servicer if no notification is received.

Re-establish online account access and re-enroll in auto-pay.

Monitor credit reports for any discrepancies and dispute errors if needed.

Official servicers

Borrowers should ensure they are interacting with officially contracted federal student loan servicers to avoid scams.

The Department of Education continues to monitor transfers to limit disruptions, but borrowers are encouraged to stay proactive in managing their accounts.