Some well-known loan servicers include student loan servicers Nelnet, Great Lakes, and Navient.
Alternate name: Mortgage servicer, student loan servicer, payment servicer
How Does Loan Servicing Work?
Your loan servicer is responsible for the day-to-day management of your loan and collecting monthly payments. Your servicer must comply with additional federal and legal requirements, too. For instance, if you have a mortgage, your loan servicer is required to:
Apply your payment to your loan the same day it’s receivedTell you your current payment amountContact you about missed paymentsGive you detailed information about your payment history
A mortgage servicer will also manage your escrow account and use it to make escrow payments for taxes and insurance as they come due each year.
Types of Loan Servicers
There are student loan servicers, personal loan servicers, and even mortgage servicers. However, each of these may be one type of loan servicers, such as a bank, online lender, or even a third-party company.
Banks
Until the financial crisis of 2008, banks commonly originated and serviced loans, and some still service loans today. But due to the exponential growth of the lending industry, banks often hire other companies to handle the servicing for them.
Non-Bank Lenders
If you used a non-bank lender to take out a loan, such as an online personal loan lender, then that company may choose to service the loan in-house.
Third-Party Vendors
Because of the work involved in loan servicing, banks and financial institutions often use third-party vendors to service loans. These companies are responsible for maintaining the loan and ensuring it complies with state and federal regulations.
Do I Need a Loan Servicer?
If you’ve taken out a mortgage, personal loan, or student loan, you’ll need a loan servicer. Your servicer is responsible for keeping you up to date on your payment terms, answering your questions, and communicating important information about the loan.
Loan Servicers vs. Lenders
Aside from making payments on your loan, you can contact your servicer if you’re having trouble making your monthly payments or have questions about your loan. Occasionally, borrowers run into issues with their loan servicer and want to switch to another. This is really only an option if you refinance or consolidate your debt, otherwise, you can’t change your loan servicer. If you have trouble with a servicer withholding important information about your loan, you can file a complaint with the Consumer Financial Protection Bureau (CFPB), or the Federal Student Aid Office of the Department of Education (for student loans). If you believe your servicer is committing fraud, you can also file a report with the Federal Trade Commission (FTC).
Notable Happenings
Claims against loan servicers have not gone unnoticed by the nation’s attorneys general. In January 2022, Attorney General Josh Shapiro announced a $1.85 billion deal with Navient to resolve claims of abusive loan servicing practices. As a result of the settlement, about 66,000 borrowers will see their student loan debt canceled, and 350,000 more will receive about $260 apiece in restitution payments.
