Education Secretary Betsy Devos (Photo by John Lamparski/Getty Images)
If Nelnet or Great Lakes service your federal student loans, you may get a new student loan servicer soon.
Here’s what you need to know.
Nelnet and Great Lakes, which are part of the same company and collectively service federal student loans for approximately 13 million student loan borrowers, will no longer service federal student loans after December 2020. The surprise announcement comes as the U.S. Department of Education, led by Education Secretary Betsy DeVos, seeks to improve student loan servicing. What is a student loan servicer? When you pay federal student loans, you don’t pay the federal government or Department of Education directly. Rather, you pay your student loan servicer, which collects your student loan payments and provides customer service.
“This is another major step toward our commitment to improving customer service and holding our contractors accountable for their performance,” DeVos said. “Students, parents, borrowers, and schools deserve a world-class experience when dealing with [Federal Student Aid], and I’m confident that FSA has hired the companies with the knowledge, experience and expertise to deliver that.”
On June 24, the Department of Education announced that Federal Student Aid — which provides more than $120 billion of financial aid to more than $68 million students across 5,800 postsecondary institutions each year — signed contracts with five student loan servicers to service federal student loans and provide “enhanced customer support”:
- Edfinancial Services LLC
- F.H. Cann & Associates LLC
- MAXIMUS Federal Services Inc.
- Missouri Higher Education Loan Authority (MOHELA)
- Texas Guaranteed Student Loan Corporation (Trellis Company)
DeVos wants to streamline and simplify student loan repayment. Under DeVos’ new plan, you might start making student loan payments through a centralized platform, studentaid.gov, rather than through the individual student loan servicer websites. DeVos believes the current student loan servicing system lacks consistency and accountability, which hurts student loan borrowers.
Nelnet: “We are shocked”
“We are shocked that the two highest rated servicers and the dedicated employees who are responsible for achieving those rankings will not be considered by the Department for this contract,” Nelnet CEO Jeff Noordhoek said. “We are frustrated and disappointed by this decision and the lack of transparency in the process and will pursue every legal avenue available to ensure that students have the high quality service they’ve come to expect from us.”
In June 2009, the Education Department awarded Nelnet student loan servicing contracts. As of March 31, 2020, Nelnet was servicing $185.5 billion of student loans for 5.5 million borrowers under its contract, and Great Lakes was servicing $243.2 billion of student loans for 7.3 million borrowers under its contract. These servicing contracts expire on December 14, 2020 with two optional six-month extensions through December 14, 2021. Separately, Nelnet services $48.7 billion in FFELP, private education and consumer loans for 2.1 million borrowers that are not impacted by the Education Department’s decision.
What you should do next
If Nelnet or Great Lakes service your federal student loans:
- Don’t panic.
- Keep making your regular monthly student loan payments to Nelnet or Great Lakes.
- You don’t need to apply for a new student loan servicer.
- The Education Department will assign you a new student loan servicer.
- Once you are informed of your new student loan servicer, you can begin sending student loan payments to your new student loan servicer.
- Once that happens, make sure to update auto payments.
How to pay off student loans faster
If you have student loans, make sure to have a game plan. What’s the best way to pay off student loans faster? Start with these four options, all of which have no fees: