When student loan servicers change hands, the transition can lead to major headaches — just ask Annie Nova in New York City. Nova is a reporter for CNBC, and since finishing grad school in 2017, had been making loan payments to Nelnet, her student loan servicer, until her loans were suddenly transferred to a new servicer. She discovered they’d been placed in administrative forbearance — even though she’d never asked for a pause. That meant her balance could quietly grow as interest accrued. (1)
It’s standard practice for student loan servicers to place your federal loans into administrative forbearance during the transition from one servicer to another. Typically, the status lasts for up to 60 days. (2) The goal is to give borrowers some time to find out about the transfer and take appropriate action, but because the Department of Education doesn’t always clearly communicate when or why these pauses occur, many borrowers don’t realize they’re accruing extra interest until they log in and check.
During administrative forbearance, your loans will likely continue to accrue interest charges even though you don’t have any payments technically due. (3) Nova decided to make her regular monthly payment to her new servicer immediately, even though her next payment due date wasn’t until the next month. With that, she avoided extra interest charges accruing.
But, unfortunately, Nova isn’t alone in experiencing major hiccups as the Department of Education reassigns some borrowers to a new loan servicer. In 2024, more than an estimated 1 million borrowers were transferred from Mohela to other servicers. In 2022 and 2023, Forbes estimates that more than 30 million student loan borrowers saw their loans transferred to a new servicer.
If you are one of the 42.5 million borrowers with federal student loan debt, (4) here’s what you need to know about why issues with servicer transfers can crop up and how to prevent damage to your repayment journey today.
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Hiccups during loan servicer transfers
Annie’s confusion wasn’t unique. Many borrowers face similar hurdles when their loans are reassigned — especially when communication between servicers breaks down. With an average federal student loan debt of $39,075, it’s natural for many borrowers to experience anxiety as their loans get transferred. (5) Since it often takes 20 years to pay off student loans, it’s possible that your loans will be transferred a few times along the way. (6)
Central Research Inc. (CRI) is the newest federal student loan servicer. In recent months, more federal borrowers have reported their loans being transferred to this new servicer. (7)
When a student loan is transferred from one servicer to another, there’s often a bit of confusion. Of course, the amount you owe to the Department of Education doesn’t change. But the paperwork shuffle can create some hiccups.
Typically, you can expect the process to start with an email or letter from your current loan servicer stating that your loan will be transferred to another servicer. From there, the new servicer will load your loan into their platform and provide information on how to make payments going forward. (8)
The space between your old servicer closing out your loan and your new servicer picking up your loan is essentially no man’s land. Your old servicer isn’t accepting payments, and your new servicer might not be ready to receive payments.
In order to prevent an accidentally missed payment, many new servicers choose to put your loans into administrative forbearance during the transition. Typically, this gives you some extra time to make a payment after the loan has been transferred.
While your loans won’t necessarily be put into administrative forbearance during a loan servicer transition, it’s likely that your loans will be granted this status. Administrative forbearance might offer a brief reprieve from payments. But during forbearance, your loan may continue to accrue interest. If you don’t keep up with the regularly scheduled payments, you’ll likely end up paying more interest than expected.
Read more: How much cash do you plan to keep on hand after you retire? Here are 3 of the biggest reasons you’ll need a substantial stash of savings in retirement
How to stay on top of your student loans
Annie’s situation highlights how little control borrows have when these transfers happen, and how easily details can slip through the cracks. Unfortunately, borrowers can’t opt out of a transfer. The Department of Education assigns servicers based on federal contracts, not individual preference. Sometimes, the transfer is due to your current loan servicer shutting down or simply not having enough capacity to service your loan. But you can take action to make sure any potential transfers run as smoothly as possible.
For starters, make it a point to keep detailed notes about your loan. Each month, take a screenshot of your loan details and download any important information from your current loan servicer. Make sure the information includes your correct balance, interest rate, progress toward forgiveness programs, and more.
Remember, nothing about your loan should change when it moves to a new servicer. But if a mistake happens, it’s helpful to have proof of your previous loan details to get any issues resolved.
When you discover that your loan is being transferred, make every effort to get enrolled in the new servicer’s payment system as quickly as possible. Once your new account is live, you can resume making payments at your regular cadence. While you could wait until the administrative forbearance expires, that could lead to extra interest charges.
If your loan accrues extra interest during administrative forbearance, contact your new servicer immediately and request a review. If the pause was applied in error, they may be able to reverse the interest or credit your account.
If your servicer doesn’t resolve the issue, you can file a complaint directly with the Federal Student Aid Group through the Department of Education. They can investigate and, in some cases, help reverse improper interest charges. They can investigate and, in some cases, help reverse improper interest charges but under most circumstances, it’s unlikely that the DOE will reverse your interest charges.
Annie’s issue was eventually resolved, but it could have cost her if she hadn’t checked her account right away. Her story is a reminder that, even if a loan servicer transfer runs smoothly, vigilance pays off. Keep detailed records, confirm your status after every transfer, and don’t hesitate to contact your servicer or the Department of Education if something doesn’t look right. A few quick steps can make the difference between staying on track and watching your balance quietly grow.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CNBC (1); LendEDU (2); Federal Student Aid (3), (6), (8); Education Data Initiative (4), (5); CRI (7);
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.