Student Loan Servicers Ruin Your Credit

Huh? Could that be? Could your student loan servicer be ruining your credit score?

What a lot of student loan borrowers don’t realize, is that even though their loans were issued by the federal government through the department of education, they are actually “serviced” by a variety of companies known as “Student Loan Servicers”.

These companies have the names students know: Sallie Mae, NelNet, FedLoan, and more.

The servicing companies are paid by the government to manage your student loans. The government doesn’t have the necessary resources and tools to easily manage the high amount of student loans, so they contract it out to financial companies that are better suited to do it. However, that’s where students can run into trouble.

Since the government has passed the buck, what is a student to do if the company handling the loan messes up? You need to be extremely careful!

What Student Loan Servicers Do

The student loan servicing companies are designated by the Department of Education to collect payments, respond to customer service inquiries, and perform other administrative tasks associated with maintaining a federal student loan.

Once you apply for a Federal Student loan, the Department of Education assigns your loan to one of it’s designated loan servicing companies. These companies will disperse the loan to your school, send your statements, and then collect your payments once you graduate.

These companies can also help you with different student loan repayment plans, as well as deferment and forbearance needs, or you can contact a company like US Student Loan Center to handle your student loan issues.

Finally, they are also the ones that will try to collect on loans that haven’t been paid, including reporting borrowers to the credit bureaus and seeking wage garnishments.

These companies are essentially the paperwork keepers for your student loan.

How Student Loan Servicing Companies Can Accidentally Hurt Your Credit Scores

It’s the last area that these companies can really impact student loan borrowers – these are the companies that report borrowers to the credit bureaus and seek repayment on student loan debt. They can also cause tax nightmares for borrowers because of this.

The problem lies in the fact that these companies transfer student loans back and forth amongst themselves all the time. It’s not common for a borrower to have their loan transferred two or three times before they graduate. You can originally start with Sallie Mae and end up with FedLoan.

Sometimes when loans are transferred from servicer to servicer, you have to remember to change all your automatic payments that you may have had set up, because sometimes they don’t transfer. You may also have to re-sign up for online statements so you can continue to qualify for an interest rate reduction, which can be a hassle, but it’s worth the savings.

The trouble comes when there is a lag time in these notifications, and you, as the student loan borrower, don’t always know where your loan is or with which servicing company.

In some cases the student loans may not be successfully transferred and as a result, they will not post the payment, and you can be put into a delinquency status.

Needless to say, this switching from servicer to servicer and the time it takes for you to get all the information could potentially damage your credit score due to having a late payment. All because of their mistake. This is what student loan borrowers need to pay attention to, since it is such a common problem.

What Can Borrowers Do

There are a few ways that you can protect yourself as a student loan borrower.

Know Where Your Loans Are:

First, you should always know where your student loans are. You can access the National Student Loan Data System, which is maintained by the Department of Education, to look up where you student loans are. You can enter your Social Security number, birthday, and other information to pull up any student loans that are in your name. That way you can check to make sure that everything is correct.

Check Your Credit:

You should also make sure that you know your credit score and check your credit report annually. You can use free services like Credit Karma to pull up your credit score, and you can use their tools to help fix any issues. You can also pull up your credit report annually using the site: AnnualCreditReport.com. That is the only site authorized by the Federal government to let you access your credit report for free each year.

Contact Your Student Loan Servicer:

If there are issues on your credit report, you need to contact your student loan servicing company as soon as possible to see what went wrong.

Contact the Department of Education Ombudsman:

If you’re unable to resolve the issue directly with your lender, you can contact the Department of Education’s Student Loan Ombudsman. This group is is dedicated to helping resolve disputes related to Direct Loans, Federal Family Education Loan Program (FFEL) loans, Guaranteed Student Loans, and Perkins Loans. The Ombudsman Group is a neutral, informal, and confidential resource to help resolve disputes about your federal student loans.

Contact Us!

We use the best repayment programs available through the US Department of Education to get you the lowest student loan payment possible. Further than that, we will attempt to enroll you in any forgiveness programs that may be available. Your eligibility for student loan forgiveness depends on the type of student loan in question.
Call us at 877-433-7501 to get started.