Why did another company start managing your student loan?

The student loan servicer that manages and collects payments on your student loans can change.

A loan servicer acts as an intermediary between you and your mortgage lender, the company that originated your loan. If you have federal student loans, the U.S. Department of Education (DOE) assigned your loan servicer (you can find out who your servicer is by visiting My Federal Student Aid). If you have private loans, your private lender selected your loan servicer.

So, what happens when another company takes over your loan payments? Here’s what to know.

Why did another company start managing my loans?

Your student loan servicer can change hands for several reasons. One of the most common, if you have private loans, is that your lender sold your debt to another lender, who then assigned a new servicer to collect payments on their behalf. If that happens, your original mortgage lender must notify you that you have a new loan servicer typically via email and snail mail within 15 days of the transition.

In addition, if you consolidate your federal student loans — a process where you combine your existing loans into one direct loan — your loan servicer could change. Similarly, if you refinance private student loans, you’ll have the option to transfer them to another lender, who can then assign a new loan servicer. By refinancing, you’ll receive a new interest rate, which can help lower your loan payments and build a new repayment schedule.

Not happy with your loan servicer? Your first course of action is to contact your lender and let the company know about the issue, such as a disagreement over the balance of your loan. Be prepared to provide relevant records and documentation, such as bills and balance statements, to plead your case for a new loan servicer.

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Another route you can take is to lodge a formal complaint against your loan servicer with the Consumer Financial Protection Bureau (CFPB), the federal regulator that supervises the student loan servicing and lending market. From 2012 to 2017, the CFPB handled more than 50,000 student loan-related complaints related to problems such as servicing breakdowns, debt collection hurdles, and “debt relief” scams. You can submit a complaint online or call (855) 411-CFPB (2372).

What’s the difference between a loan servicer, loan holder, and debt collector?

Your loan servicer is in charge of collecting payments and otherwise managing your loans. In contrast, a loan holder is a company that owns your student loan debt. In some cases, your loan servicer and loan holder are the same company, but usually, they’re separate businesses.

A debt collector is a third entity that you should be aware of. If you’re past due on your loan payments, your lender may transfer your debt to a collection agency, which then becomes in charge of collecting the money that you owe on your loans.

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Pro tip: if you’ve fallen behind on your student loan payments, you might consider consulting a credit counselor, a financial professional that can help you devise a plan to repay your loans and avoid missing payments in the future. To find a reputable credit counselor, you can try the Financial Counseling Association of America or the National Foundation for Credit Counseling.

Keep track of your loan payments during the transition

Most servicer changeovers run smoothly, but problems can arise. For example, maybe you had set up automatic withdrawals with your former servicer that didn’t transfer over to your new servicer; if that happens, you could be at fault for any late or missed payments.

As a result, it’s wise to stay on top of your loan payments when your servicer changes to ensure nothing falls through the cracks. In addition, you’ll want to contact your former servicer to receive documentation that shows your record of making on-time payments — providing you with evidence that you can present if your new servicer claims that you missed a payment.