CHARLOTTE, N.C. — A major change is coming to a popular student loan program that could cause headaches for millions of front-line workers, including teachers, doctors and nurses.
Student loans have been front and center for a while now, but this is a headache few saw coming. FedLoan Servicing, one of the largest student loan services contracted by the U.S. Department of Education, said it will be getting out of the student loan game altogether at the end of 2021, saying loans are getting too complicated and too costly.
Despite navigating medical school and a tumultuous year of COVID-19, Dr. Niel Andrews is worried he'll have to deal with an even bigger problem. He's one of the millions of borrowers across the country who have a loan run by the Department of Education that's managed by FedLoan Servicing.
"It's been something hovering over our heads," Andrews said. "The uncertainty is unsettling and I'm anticipating all the problems that will arise."
The good news for people with FedLoan accounts is their interest rates shouldn't change, and it shouldn't cost them anything, as long as they know how to handle the changes.
"That leaves 8 to 9 million borrowers, about 20% of all federal loan borrowers without a servicer," said financial planner Will Koster. "All those loans will need to be transferred."
That's what worries Andrews and many of his colleagues. He admits most of them don't do a lot of homework before signing up for student loans.
"Doctors don't spend a lot of time doing financial planning," Andrews said. "So the loans are almost guaranteed to be taken by doctors. It kind of reminds me of when you're in an emergency room having a heart attack. You don't say, 'hold on, let's shop around.' You need that right now."
Koster, who focuses on student loans, says the pending changes to these loans could lead to late fees or worse if the paperwork isn't all buttoned up.
"We all know if there are mistakes, or if payments aren't calculated correctly or a borrower misses a payment, there can be penalties," Koster explained. "They're going to have to have all of their information and data transferred correctly to that new servicer so it's going to cause a lot of confusion."
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Andrews is already getting things in order, anticipating a mess at the end of the year, when FedLoan's contract is up.
"Having that hanging over our heads is added stress to an already stressful profession," Andrews said.
The major problem is we don't yet know who will be taking over the loans but borrowers can still get ready. First, make sure you know who services your loan.
You can check your Federal Student Aid (FSA) account and see who your loan servicer is. Borrowers can also call 1-800-433-3243. Borrowers should log in to their account and update their contact information, as well as their current loan servicers.
Another good tip? Download your payment history so there's a record of it. Also, keep an eye on any automatic payments to make sure it's going to the right place.
Lastly, keep an eye out for a notification from the Department of Education about who is taking over your loan.