One of the biggest student loan servicers in the U.S is multiplying into what will likely become two of the biggest student loan servicers. If Sallie Mae didn’t already scare you, it might now.
In May of 2013 Sallie Mae announced that it would be splitting into two companies but kept some of the details under wraps. Now, it’s released more information on the eventual split, including the name of the yet to be created company. Straight from the Sallie Mae press release, choosing the name was just “another step toward the successful completion of Sallie Mae’s plan to separate later this spring into two, publicly traded entities: a consumer banking business and the newly named loan management, servicing and asset recovery business.” So what will the new Sallie Mae offshoot be called? Navient.
The two companies will both service student loans, though they will ultimately hold differing functions. Sallie Mae will continue to service newly originated private student loans and begin to offer some banking services, while Navient will be taking over many of the private student loans currently held by Sallie Mae. Navient will also be taking over the reigns for managing federally originated student loans and servicing those in repayment for these loans.
Why is the split important?
This change is important for several reasons:
Sallie Mae is currently one of the largest student loan servicing companies in the United States which means that any changes will impact a huge pool of borrowers.
Though borrowers shouldn’t expect any big changes to their repayment plan, a shift of this magnitude is likely to inconvenience a select subset of borrowers.
The splitting of the company means that they can service even more student loans. And there’s been no indication that the split will inspire a more transparent lending system.
When will the split take place?
Though the plan to split has been on the books for a while now, the rollout is taking time. The split won’t go into effect until Fall 2014, so borrowers have plenty of time to do their research.
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How will the split affect borrowers?
Sallie Mae claims that the impact will be minimal, with no financial repercussions for any of their borrowers, besides changing where and how certain payments are made.
Those with federal student loans will likely see a change in not only the name of their servicer but also the website where they pay their loans. Perhaps the biggest change will be for those in repayment of federal student loans who currently pay via mailed check or through a bank or bill paying service. If you fall within that category you’ll need to begin addressing payments to “Navient” rather than “Sallie Mae” once the split becomes official.
Regardless of the minimal changes, borrowers should remain diligent as servicing switches can sometimes cause delays and confusion between borrowers and the new servicers. These hiccups can occasionally result in late payments or similar problems that prompt unexpected fees.
Resources for those in repayment
If you currently have a loan with, or have loans serviced by Sallie Mae you’ll want to touch base to ensure that you won’t be surprised by new rules or regulations. For more information you can check out the Federal Student Aid’s FAQ page which anticipates and answers some of the questions borrowers may be asking.
If you’re currently in repayment, make sure continue your plan in the most efficient way possible and to read your monthly statements to ensure your money is being applied in the way that you want it to be. Our student loan resource center is a great place for extra information, and if you’re looking to accelerate your repayment you can check our our recent post to pay off your student loans – even faster.
We’ll continue to keep you in the loop as new information arises. Until then, let us know – have you experienced loan servicing changes that have impacted your repayment?
Image Credit: daniel.d.slee