Got student loans? The Education Department wants to change how you pay them back

Can you name your student loan servicer? If the federal government’s new proposal goes according to plan, you won’t have to.

The U.S. Department of Education announced Monday that it wants to streamline the way grads pay off their federal student loans. The department plans to create a new online student loan portal where all borrowers would make payments, sign up for repayment plans, and find answers to student loan questions.

As it stands now, borrowers must work with their student loan servicers for those purposes. Servicers are private companies contracted by the government to collect payments from federal student loan borrowers and keep loans in good standing.

But working with servicers is a common source of confusion for borrowers, says Betsy Mayotte, director of regulatory compliance at American Student Assistance, a nonprofit that provides student loan education. “Borrowers saying it’s complicated to keep track of their loans has been a running theme for many years,” she says.

Borrowers’ experiences can also vary from company to company, according to student loan advocates, and as detailed in a September 2015 Consumer Financial Protection Bureau student loan servicing report. In a blog post announcing the initiative, U.S. Under Secretary of Education Ted Mitchell said one goal of the new platform would be to remove the need for grads to know which servicer they’ve been assigned.

“It really shouldn’t matter who your servicer is,” says Jennifer Wang, director of the Washington, D.C., office of the Institute for College Access & Success. “Borrowers should have consistent, accurate information regardless of whether they have one servicer or another servicer.”

So what would the Department of Education’s plan mean for you? Here are the basics:

• If you wanted to make an online student loan payment, you would do it on the new, government-run portal, not your servicer’s website. Your servicer would work behind the scenes to collect and process your loan payments and requests for a different repayment plan.

• Communication about student loans would come from the Department of Education, not servicers. That means the department would send you emails or letters about your loans, not FedLoan Servicing, Great Lakes, Navient or other servicers.
• You would have access to “high-quality, one-on-one customer service” on the new federal loan management portal, according to Mitchell’s blog post.

• You would experience a decrease in sudden transfers of your loans to a different servicer, which can be confusing and result in missed payments and changes to repayment benefits, according to the CFPB report.

• You would have a new and potentially more convenient way to make complaints about your servicer to the Department of Education. Currently, borrowers’ best option to submit a student loan complaint is through the CFPB. More than 5,000 grads have done so regarding their private student loans, according to a NerdWallet analysis.

There’s no date set for the portal to go live; the government is accepting proposals through May 9, 2016, from contractors interested in helping create it. In the meantime, you can look up which federal student loans you have and who your loan servicer is on the National Student Loan Data System.

Whatever the new portal will look like, advocates say it’s a step in the right direction.

“Anything we can do to make things less complicated for borrowers is a great thing,” Mayotte says.

Brianna McGurran is a staff writer at NerdWallet. Email: bmcgurran@nerdwallet.com. Twitter: @briannamcscribe. NerdWallet writer Teddy Nykiel contributed reporting to this post. This article first appeared in NerdWallet.