Student loans getting transferred to a new servicer? Here’s what you need to know

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Managing student loans can be a complicated process; learning how to pay them on time and navigate your loan servicer website takes some getting used to. The last thing you want is to switch loan servicers and start the process over again.

But sometimes that’s out of your control. Student loans are often transferred to a new servicer, either from a company buyout or federal loans being transferred. However, in general, having your loans transferred shouldn’t affect your repayment plan. Here’s what to know.

What happens when your student loan servicer gets bought?

When your loan servicer gets bought or your loans are transferred, you will receive a notice from your current student loan servicer and a welcome letter from your new servicer. The promissory note that you sign for each new student loan requires both the old and the new servicer to notify you of the change. You should receive a letter from each of them when there is a servicer transfer.

While loan terms won’t change if your student loan servicer changes, it can lead to a confusing shuffling of funds, some of which take borrowers by surprise. You will see a different servicer on your credit reports, and you’ll need to familiarize yourself with different customer support. The new servicer may also have a different website or payment plan options. The new servicer should communicate any significant changes in the welcome letter.

What to know about federal vs. private student loan servicers

Federal student loan servicers and private student loan servicers can both be transferred, and both must follow specific guidelines to notify you about the changes.

Change in a federal student loan servicer

Your federal student loan servicer could change for a few reasons. You may experience a change because the U.S. Department of Education ended its contract with your servicer, a process that could be affecting more borrowers in the coming year.

You will also experience a servicer change if you sign up for Public Service Loan Forgiveness (PSLF). Right now, the U.S. Department of Education has only one servicer that manages accounts enrolled in the PSLF program. So if you sign up for this program or others like it, you may get a new student loan servicer. You will also get a new servicer if you take out a Direct Consolidation Loan, though in this case you will be able to choose your preferred servicer.

Change in private student loan servicer

You may experience a change in your private student loan servicer, as well. This often happens when a loan servicer is sold or when a private student loan company goes out of business.

For instance, Wells Fargo is currently in the process of exiting the student loan business; because of this, all existing loans are being sold and transferred to a different servicer.

Key considerations during the transfer

There are no “rights” that consumers hold when it comes to their loan servicers getting bought, says Mark Kantrowitz, student loan expert and former vice president of research of But there are a few things that borrowers can look out for to make sure the transition goes as smoothly as possible.

Kantrowitz offers the following advice.

Autopay might not transfer to the new servicer

If you have your monthly payments automatically taken out of your bank account, you will likely need to re-enroll in the service once the transition is complete.

Doing so is crucial — most servicers don’t inherit your past authorization and require a new one. If you don’t re-enroll, you might go months without actually making a payment on your loans, which could result in them ending up in default. Plus, automatic payments are usually the key to getting a discount on your interest rate, so your rate could rise if you don’t reinstate autopay.

Some features might disappear

If you’ve consolidated your loans with another company, you might lose some enticing features, like automatic biweekly payments instead of monthly payments.

If you set up something similar with your new servicer, specify where you want your extra payment to be going. Some servicers might not automatically put it toward interest.

Just because your account says ‘$0’ doesn’t mean your loans have magically disappeared

While it would be a welcomed miracle for an entire balance to “get lost” in the transition, it’s highly unlikely that will happen.

Some student loan holders log in to their accounts and see a balance of $0, as well as expected payments being $0, as close as a week before the payment due date. However, even so, you’ll need to continue making payments regularly to avoid defaulting.

Be proactive about any repayment or forgiveness plans you were previously on

With any data transfer, things can get lost along the way. This can be detrimental if you’re on a loan forgiveness program, like income-driven repayment, where each month’s payment counts toward your loans being erased.

Once the transfer is complete, call the new servicer to confirm your plan.

Make copies of your account balance, monthly payment and schedule

Kantrowitz stresses the importance of keeping records from before and after the transition. He recommends making printouts of your loan balances, as well as your monthly payment amounts, before and after the transition.

By keeping track of how much you owe and what your payments are, you can avoid any mix-ups turning into costly interest payments.

“You need to pay attention,” Kantrowitz says. “You need to stay on top of things because if they somehow lose your paperwork during the transition, it will manifest itself in the future.”

Next steps

The transfer of student loan servicers is not uncommon, and if you find yourself in this situation, know that you can manage the transition with a few simple steps:

  1. Confirm your new servicer. You should receive a notification from your old servicer and a welcome letter from your new servicer if your loans are transferred. If you don’t receive a welcome letter, reach out to the old servicer to find out who the new servicer is. You can also look up your federal student loan servicer in the National Student Loan Data System (NSLDS).
  2. Set up automatic payments. If you had an automatic payment set up with your old servicer, it won’t transfer over to the new one. If you’d like to continue (or start) using autopay, use the new loan servicer’s site to set up your preferences.
  3. Explore your new servicer’s website and processes. All loan servicers have the same set of guidelines they need to follow for managing your student loans. However, they may handle the loans or process payments differently from your previous loan servicer. Spend time getting to know the details of your new servicer to make sure that everything is set up right for your needs.

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Written by
Emma Woodward
Contributing writer
Emma Woodward is a freelance writer who loves writing to demystify personal finance topics. She has written for companies and publications like Finch, Toast, JBD Clothiers and The Financial Diet.
Edited by
Student loans editor