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- Student loan servicer Granite State Management and Resources is not renewing its contract with the government.
- The government will transfer your loans from GSMR to another lender, though details are unclear.
- Save copies of all relevant student loan documents now in case they get misplaced in the transition.
- Read more of Personal Finance Insider's loan coverage here.
Granite State Management and Resources, a student loan company that services federal loans, announced on Monday it would not extend its contract with the government after December. If you're one of the 1.3 million borrowers that GSMR services, the Department of Education will transfer your loan to a new company after this contract expires, though the details are hazy.
The Pennsylvania Higher Education Assistance Agency, another federal loan servicer, made a similar move two weeks ago when it announced it wouldn't renew its federal contract. This brings the total number of borrowers in flux to nearly 10 million.
Fortunately, there are several things you can do to prepare for the switch – or avoid it altogether if you choose to do so.
Document all of your current paperwork
One of the bigger problems you might face as your loans are handed over from one student loan servicer to the next is the lack of consistent record keeping. You'll want to make sure you can prove you made timely payments on your loans, so you can print or download your payment history from your lender's website and store it in a safe place.
Keeping track of your payment history is particularly important if you're in the Public Service Loan Forgiveness program or are on an income-driven repayment plan, as the time spent repaying these loans is crucial to eventually get student loans forgiven.
You should also retain copies of all correspondence between you and your loan servicer, including anything referencing your enrollment in PSLF or an income-driven repayment plan. Save paper copies if you can and upload digital copies to the cloud.
Keep track of your credit report
When your loan is transferred from one servicer to the next, you may run into erroneous negative credit reporting, such as an incorrect missed payment. This can continue to hurt your credit score if you don't catch it, so get a copy of your credit report and know where your account currently stands.
You can find your credit report for free on annualcreditreport.com from any of the three major credit bureaus weekly through April 20, 2022. While this report won't give you your credit score, it will show you information about your credit and payment history, which lenders use to decide whether to give you a loan. Reviewing your credit report can help you know what you need to improve.
Get a new servicer through a federal Direct Consolidation Loan
If you have multiple federal student loans with your lender, you may consider consolidating them into one monthly payment with a Direct Consolidation Loan and getting a new loan servicer. Here are the benefits and drawbacks of consolidation:
Refinance your loan with a private company
If you want to choose your new provider without waiting for the government to reassign you, you might consider a private lender. You may be eligible for a lower interest rate or a term length that better suits your needs with a private company. You might be able to take out a variable-rate loan with a private lender, while you can only get a fixed-rate loan with the government. You can find our list of the best private student loans here.
However, be careful before you do this because you'll lose federal protections when you refinance with a private lender. You won't be eligible for COVID-19 related forbearance, which is currently in effect until September 30, 2021. Additionally, the Biden administration continues to consider forgiving student loans, which would not apply to private loans.
Reach out to your servicer for any additional questions
As the federal government decides how to transition nearly 10 million borrowers to a new servicer, your servicer will likely have the most up-to-date information on where your loan is headed next, and can likely answer any questions.
If you don't want to deal with the drawn-out process of changing student loan companies, you can take steps to switch your servicer now. Otherwise, just make sure to keep a careful eye on your documentation so you can ensure errors don't occur in the transition.
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