Americans hold an astonishing $1.56 trillion in student loan debt. This money is spread across 45 million borrowers who hold an average loan amount of nearly $30,000.

Who handles all these loans? The federal government? 

Nope. The government hands this job over to federal student loan servicers. This is the company you make your student loan payments to. Let’s find out more about them here.

What are federal student loan servicers?

The government provides the education loan when you apply for federal student aid, but they don’t deal with the loan afterward. That job is handed over to a loan servicer. 

Most people with student loans have more than one loan since you have to reapply for a new loan for each semester that you need one. Despite this, you might only make one or two payments from your bank account for eight loans. This is because your loan servicer takes your monthly payments and distributes them between your different loans.

Servicers also offer a variety of repayment options to make it easier to repay your student loans if you’re having trouble making your monthly payments. They do this in a few ways:

• Working out flexible repayment plans as your ability to pay changes 
• Allowing you to temporarily halt your autopay payments if you fall on hard times (whether through forbearance or deferment)
• Offer loan forgiveness for those working in non-profits or the public sector once they meet the requirements  

However, it’s not all rainbows and unicorns. As is often the case when an organization doesn’t have to vie for your business, customer service is poor and management is haphazard. What’s worse, they don’t really care to do anything about improving it. 

There are only a handful of student loan servicers to choose from and you don’t even get to pick anyway. You’re assigned a servicer by the U.S. Department of Education when you take out your loan.

Can you switch to a new servicer?

There are a few reasons why the Department of Education may reassign you to a different servicer. None of those reasons include you requesting a different one. 

There are only two ways to get rid of your servicer or switch to a different one yourself. Consolidate your federal loans with a Direct Consolidation Loan or refinance your federal student loans with private loans.

We’ll talk more about these options below. For now, let’s look at how 4 student loan servicers stack up.

Four student loan servicers: ranked

We’ve already established that none of the student loan servicers do a fantastic job, but some are better than others.

To find out the rankings, we looked at the number of complaints that customers registered with the Consumer Financial Protection Bureau for each company compared to the number of customers they have. From there, we extrapolated the number of complaints per million customers to create a fair metric by which to compare the companies.

1. Great Lakes

Standing out as possibly the best federal loan servicer, Great Lakes actually offers pretty decent customer service. The numbers are quite impressive compared to the others on our list, as you’ll see.

They provide service to the most customers, 8,090,000, and have the least number of registered complaints, 235. This gives them an overall total of 28.8 complaints per million. Pretty impressive!

If you’re not happy with Great Lakes as your student loan servicer, you’re kind of out of luck. The company consistently earns the best reviews out of all the servicing companies. Even if you could switch, there isn’t necessarily a better option to switch to.

What is Great Lakes doing right?

Well, customers generally like the Great Lakes website. They say it’s user-friendly and makes some tasks much easier. For example, to request forbearance, instead of calling up the customer service line and waiting on hold, you can sign up online and they don’t give you much hassle about proving your need.

In general, customers have good things to say about Great Lakes’ customer service. One common theme was that sometimes representatives gave out the wrong information. Although, in such a large company it’s not uncommon to get the wires crossed on occasion. However, the company should be making every effort to properly train all its employees.

2. Nelnet

Nelnet comes next. Out of their 6,150,000 customers, 635 filed complaints with the CFPB. This leaves them significantly worse than Great Lakes with 103 complaints per million customers.

Though Nelnet is doing significantly better than the other two federal loan servicers we’ll talk about, their customer service still leaves something to be desired. Some customers complain that nothing seems to be resolved when dealing with Nelnet’s customer service and representatives don’t seem to know what they’re talking about. Some customers also complained that they received conflicting information about an issue directly from the company itself.

Keep in mind that Nelnet is a large company and services millions of student loans. There is bound to be a bit of confusion here and there and even miscommunication. To protect yourself from fees due to miscommunications, be sure to do your own research as well as save any correspondence with the company.

3. AES/PHEAA

Next on our list, we have American Education Services (AES) which is operated by the Pennsylvania Higher Education Assistance Agency (PHEAA). The PHEAA also operates another large loan servicing agency, FedLoan Servicing, which some consider to offer the worst customer service of the lot, though it has its contenders.

According to the numbers we looked at, AES is trailing Nelnet by quite a bit. With 7,999,000 customers, they have 1,883 complaints, which leaves them with 235 complaints per million customers. 

The main theme among AES customer complaints seems to be poor and even false communication. Many student loan borrowers complain about false reporting to the credit agencies. This is a big issue as it can negatively affect your credit score, potentially by a lot depending on the error. To make matters worse, customers claim that the customer service department at AES has been less than helpful when trying to resolve the issues.

4. Navient

Of the four companies we examined (and quite possibly ALL student loan servicers), Navient comes in dead last. This company serves 6,210,000 customers and had 3,800 complaints registered with the CFPB. This gives them a disappointing total of nearly 612 complaints per million customers.

Navient may be guilty of more than just bad customer service. The CFPB and five state attorneys general all filed lawsuits against Navient at various points in 2017 and 2018. They are accusing Navient of:

• Misallocating payments
• Encouraging buyers to choose forbearance over income-driven repayment (thus accumulating more interest)
• Not being clear with customers about how to re-enroll in income-driven repayments plans or how to qualify to remove a co-signer

Navient maintains that the lawsuits cite new servicing standards being applied retroactively and they are not at fault. 

Only time will tell about how the lawsuit turns out, but regardless, we suggest staying away from Navient if at all possible.

Direct loan consolidation

So what if you’re stuck with the worst of the worst? Is there a way to switch to the best of the bad? As we mentioned earlier, there are only two ways to change up your loan servicer.

The first is by taking out a Direct Consolidation Loan (however this may be a really bad idea, so keep reading).

Remember how we mentioned that most people have multiple student loans? It’s even possible that they have more than one servicer, meaning they have to make more than one payment each month. 

You can pay off all your smaller loans with one large Direct Consolidation Loan. During this process, you can pick out which loan servicer you want to use. However, not all federal student loans qualify for consolidation.

The problem with taking our a new Direct Consolidation Loan is that you’ll reset any payments you’ve made with respect to student loan forgiveness (e.g. if you’re pursuing income-based repayment or Public Service Loan Forgiveness (PSLF)). For that reason, you likely don’t want to consolidate your federal student loans. 

If you’re not pursuing forgiveness, then refinancing probably makes more sense.

Refinancing federal student loans

But switching federal student loan servicers usually means you go from bad to mediocre at best. If you actually want a good servicer, you’ll have to refinance your federal student loans and work with a private lender.

This involves taking out private student loans to pay off your government ones. Student loan refinancing will get rid of your less-than-stellar servicer altogether and potentially lower your interest rate or get other better loan terms, saving money in the long-term.

You can do this with all federal student loans. However, doing this means that you give up your federal student loan protections. These include:

• Income-driven loan repayment plans
• Student loan forgiveness programs
• Deferment or forbearance during a time of financial hardship (although most private loan companies offer some sort of deferment or financial difficulty options).