Guiding Borrowers Through Split Servicing Using Multiple Channels of Communication

Now that ED has agreed to purchase FFELP loans as a secondary market, some of the anxiety about access has eased in the federal student loan market. But for borrowers, the ramifications of split servicing caused by these loan sales on their loan repayment will be waiting farther down the road—and they’ll need our help.

As my colleague Shelley Saunders has argued, in times such as these, the vital role of the guarantor is to proactively communicate to borrowers the most current information about their loans and loan repayment. The guarantor community will need to find ways to reach borrowers and deliver timely updates on the implications split servicing—an issue borrowers may not even realize affects them.

Fortunately, ASA, with its many avenues of borrower communication, is well-positioned to provide this guidance. For example, in addition to the interactive borrower community on www.amsa.com, ASA’s Journeys might be an effective tool in addressing split servicing. The Journeys newsletter and website offer a personal finance and career planning resource aimed at borrowers in their first 2 years of repayment. This time period is crucial, because research shows it’s when borrowers are most likely to form their lifetime repayment habits.

In a friendly, borrower-focused way, Journeys might have the opportunity explain how exactly a student may have borrowed from one lender and ended up with 2 servicers to repay. Borrowers would benefit from a checklist of need-to-know facts, such as:

• – Having multiple servicers means paying multiple loan bills each month, so borrowers need to keep track of them all
• – All of a borrower’s servicers need to be notified separately if the borrower changes his or her address
• – If a borrower needs a forbearance or deferment, he or she must apply to the servicer of each loan separately

As my colleague Susan Nathan discussed in a recent blog post, ASA is also working with our school partners to give in-school borrowers the information they need during this eventful time in the industry. And both www.amsa.com and our blogs are frequently updated with the information to keep borrowers and the entire financial aid community informed as events continue to develop.

What do you think borrowers need to know about split servicing? What questions are you hearing? How do you think we can best communicate to borrowers? We want to hear your thoughts.

Posted by Michael Ryan on July 17, 2008 at 03:21 PM EST

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