Wells Fargo is getting out of the student lending business.
The bank announced at the end of 2020 that it would sell its $10 billion private student loan portfolio. But existing borrowers at the bank, which up until last year was the nation’s third-largest private student lender, are just starting to be affected. Their loans will now be serviced by Firstmark, a division of Nelnet — the Nebraska-based student loan servicer.
Wells Fargo had already stopped accepting applications to its private student loan and student loan consolidation products on Jan. 28. Manuel Venegas, a spokesman for Wells Fargo, said in a statement that the decision came after the company decided to cut back on non-core businesses, which included its student loan portfolio.
So, what does this mean for existing Wells Fargo customers?
Betsy Mayotte, president and founder of The Institute of Student Loan Advisors (TISLA), says that the most important thing borrowers should know is that student loan transfers between servicers and lenders happen all the time and typically don’t come with any negative consequences for the borrowers.
“When a loan is sold, the terms of the promissory note are maintained so the borrower should not see any changes in payments or interest rates,” Mayotte adds.
Ashley Dixon, lead planner of Gen Y Planning, a firm that specializes in financial planning for Millennials, says that these transfers may actually come with positive changes for the borrowers.
According to Dixon, lenders often leave the student loan business because they don’t have enough time or bandwidth to service the loans. So, if you wind up with a servicer that’s focused exclusively on student debt, you may see some improvements.
Still, it pays to stay vigilant. Here are a few tips to make this transition as easy as possible.
Keep Making Your Payments as Usual
Loan transfers don’t happen overnight. In the case of Wells Fargo, the transfer to Firstmark is expected to be completed by mid-2021. Until then, you should keep making payments to your current servicer as you usually do to avoid any late fees or any negative surprises on your credit report.
Once you get a letter from your new servicer notifying you that the transfer has been finalized, make sure to create a new account with them to continue making your payments. Remember: loans are transferred automatically but your payments aren’t.
Make Sure Your Contact Information is Up to Date
Sometimes we move or change our phone numbers and forget to inform every lender. During transitions, it is especially important that all of your information is up to date, so that you receive all of your new account information in a timely manner.
Be on the Lookout for Mail from Your New Servicer, Firstmark
Even if you’re enrolled in electronic communications, you should still receive two very important letters by mail. The first one is a letter from your current lender informing you of the sale and providing you details about which accounts will be transferred. The second letter should be from your new servicer. This one should give you details such as the steps to create a new account, your loan’s repayment schedule, and where to send the payments.
Have Everything on Record
Although the loan transfer process should be seamless, there’s always a chance that some things may fall through the cracks. This is why Mayotte, from TISLA, says you should always keep a copy of your promissory note handy, so you can verify the terms and conditions of your loan if needed.
She also recommends downloading and saving copies of your most recent payments. Wells Fargo’s electronic platform only allows borrowers to lookup statements up to two years old, so if you’d like a copy of your full payment history, you should contact them to request it.
Remember that once your loans are transferred to Firstmark, the only thing that could change is your due date, everything else (interest, terms, and payment amount) should remain the same. If anything seems amiss, make sure to contact the company.
Keep a Close Eye on Your Credit Score
Dixon, from Gen Y Planning, says that even if you’ve never missed a payment, you should still keep tabs on your credit score during the first few months after the transition.
“Don’t rely on them to make sure it all goes through,” Dixon says.
While it’s uncommon, it’s possible that some of the last payments made to your old servicer don’t get posted on the date they should. Even though it’s an honest mistake, credit bureaus don’t know this and can still report it as a late payment, which can hurt your credit. If this happens, contact the lender to make sure they correct it right away.