A student loan servicer is a company hired by a federal government agency or a bank to handle billing, payment processing, and customer service for a large group of borrowers who have similar types of loans with that same servicer. The Department of Education hires nine private companies to be responsible for servicing or collecting payments from about $1 trillion in outstanding federal student loans. 

When you make a payment on your federal student loan, the money is usually sent to the servicer. The servicer then pays the outstanding interest and principal on your account. Some servicers may use advances of your payments toward future payments, while others may apply 100 percent of your payment to current interest and any late fees before applying anything toward the remaining balance due. Student loan servicers are also responsible for processing deferment or forbearance requests, discharging loans in cases of total and permanent disability, or awarding economic hardship deferments when appropriate. 

Remember that no matter who services your loan, you have rights as a borrower. 

Your rights include: 

•The right to be considered for all available repayment plans based on your income.

•The right to appeal if your servicer denies you a repayment plan based on your income.

•The right to receive information about the federal loan programs for which you are eligible so you can choose the loan program that is best for you. 

If any of your rights have been violated, or if not being offered an available repayment plan, contact us at the Project on Student Debt. If we think there is a problem with how one of our member servicers has treated you, we will take action—and educate them about their responsibilities in the process. 

When you send comments or complaints, please include key background information such as who owns your loan (the Department of Education or a private lender), what type of loan you have (Stafford, Perkins, or PLUS), what kind of loan servicer you are dealing with and where your loans are currently on repayment. 

Conclusion

Student Loan Servicers are a very important part of the student loan process. They perform many functions from processing payments to helping borrowers apply for different repayment plans based on their income, but they also have responsibilities that go beyond just collecting money and making sure loans are paid off.