What Federal Student Loan Servicing Companies Might Not Tell You

From incorrect billing statements to incomplete advice, dealing with your student loan servicing company can be frustrating.

If you have private student loans, you can often switch your servicer by refinancing with another lender. But you can only switch federal student loan servicers by consolidating multiple students loans into a federal direct consolidation loan, or by signing up for specific repayment programs such as Public Service Loan Forgiveness.

If you don’t know who your servicer is, find out by logging into your account on the Federal Student Aid website. You can also get in touch with all of the loan servicer contact centers by calling 1-800-4-FED-AID.

» MORE: How to switch your student loan servicer

Because your federal student loan servicer might not always give you the best guidance, it's important to know your repayment and forgiveness options. Here are three things to keep in mind.

1. You can lower your payments

The standard 10-year plan can allow you to repay federal loans quickly, while minimizing the interest you'll pay.

If you’re falling behind on your student loan bills, your servicer might recommend that you temporarily pause payments by signing up for a student loan deferment or forbearance. However, neither option will address your debt long-term, and your loans can still incur interest, which means a bigger balance once the pause ends.

Instead, consider enrolling in an income-driven repayment (IDR) plan. There are four income-driven plans that cap your monthly payment at between 5 percent and 20 percent of your discretionary income. Your repayment period will last between 10 and 25 years, depending on your loan types and amount owed. After the repayment period, any remaining debt will be forgiven.

For many borrowers, an IDR plan called 'SAVE' will be the best option. Unpaid interest doesn't build month-to-month, and low- and middle-income borrowers can qualify for $0 payments.

Apply and select your plan on the Federal Student Aid website, or your servicer will choose the one you qualify for that has the lowest monthly payment.

2. You need to recertify your income

Qualifying for income-driven repayment isn't a one-and-done process. You must recertify your income and family size each year with your servicer. If your income has increased, your loan payment will, too. But if your income drops or your family size changes before your annual recertification, submit an updated application and ask for an immediate payment recalculation. Otherwise, you could pay more than required.

3. You may not be on track to forgiveness

There are four key federal student loan forgiveness programs: Public Service Loan Forgiveness, Teacher Loan Forgiveness, Perkins loan cancellation and income-driven repayment forgiveness. Your repayment plan could disqualify you from some programs, even if you meet other qualifications.

» MORE: 10+ student loan forgiveness programs that discharge loans

For example, Public Service Loan Forgiveness cancels the remaining balance on direct loans — the most common type of student loan — after 120 qualifying monthly payments made while working full time for an eligible employer, such as a government organization. However, payments must be made under an income-driven repayment plan to qualify.

What to do if you’re unhappy with your servicer

Even if you know your payment options, you might run into trouble with your servicer. Unfortunately, you'll have minimal legal recourse.

Here's what you can do instead: If you can't resolve an issue directly with your servicer, file a student loan complaint. Hold on to records of all conversations with your servicer along with letters, bills or emails so you have information to reference.

Most federal student loan borrowers should file their complaint with the U.S. Department of Education’s Federal Student Aid (FSA) office, because it has the most power of any entity to directly address your issues. You can do this through its online feedback center or by calling 800-433-3243.

The federal student loan servicers

Learn more about each of the federal loan servicers, including what they can do and how to contact.