Predictably, hold times at Mohela, Nelnet, and other services have been long. Many borrowers are reporting waits of multiple hours.

The big disappointment has been the mistakes and bad guidance that some borrowers have received. The Department of Education makes it clear that borrowers shouldn’t have to pay for help to manage their student loans, but the companies tasked with helping borrowers haven’t done their job.

What went wrong?

Can it be fixed?

And who is to blame?

Mohela, Nelnet, Aidvantage, and Edfinancial All Deserve Some Blame

In the winter of 2020, the servicer trade organization warned that they would receive more calls in the first month of repayment than what they normally receive in a year.

Making matters worse, these companies all cut staff during the pandemic.

However, they had plenty of notice on the restart date. Even though the date had been a moving target, this time around, there was legislation spelling out when the restart would happen.

To help servicers, the Department of Education started charging interest an entire month before payments were due. This move should have spread out demand for assistance over the course of a couple of months.

Sadly, servicers were still not ready. Long hold times are a clear sign that staffing levels are too low. The processing mistakes and inaccurate guidance indicate that the staff wasn’t properly trained.

Congress Dropped the Ball

Our student loan system is frustratingly complicated at times. Between Perkins Loans, FFEL Loans, Parent PLUS Loans, Spousal Loans, and Direct Loans, we have a long list of loan types, each with different eligibility rules.

Further complicating things is the long list of repayment plans. Each new repayment plan has helped make things more affordable for borrowers, but each weighs down the system. More options mean more complications.

Congress could create one repayment plan and make all loans eligible. Congress could automate the entire process. Congress could offer debt relief. Instead, Congress hasn’t made any comprehensive reforms in years, and borrowers are stuck in this mess.

The Department of Education’s Big Mistake

Over the past few years, the Department of Education has made numerous efforts to help borrowers and correct past issues. For example, the Limited Waiver on PSLF was created to help borrowers who received inaccurate guidance about the Public Service Loan Forgiveness Program.

Unfortunately, the Department of Education repeatedly makes the same fundamental servicer error.

Contracts with loan servicers specify minimum standards of performance. There is almost no incentive for Mohela, Nelnet, or Aidvantage to innovate or improve things. The less money they spend meeting that minimum standard, the more profit they generate.

A Simple Fix to Servicing Nightmares

There should be more servicers to choose from, and borrowers should be able to pick their servicers.

Currently, borrowers are assigned to a servicer and have almost no control over who services their loans.

If borrowers could move to a different servicer, servicers would have an incentive to keep hold times low and to be helpful. Servicers would have to compete to keep borrowers on their books. Servicers would have an incentive to innovate and to provide excellent service.

This change wouldn’t be very expensive, but it could dramatically change the quality of service that borrowers receive.

Two Parties Who Don’t Deserve Any Blame: Borrowers and Customer Service Representatives

I’m intentionally putting borrowers and low-level servicer employees in the same bucket.

Both groups are victims of the same broken system.

From the borrower’s perspective, the hours-long hold times are a recipe for anger and frustration. By the time they talk to an actual human being, they get rushed and, at times, get inaccurate information. It becomes a challenge to keep your composure.

From the customer service representative’s perspective, things are likewise ugly. All day long, you are tasked with helping angry and frustrated borrowers. They ask questions you haven’t been trained to answer and blame you for things you have no control over. Worse yet, it never stops. There is one angry caller after another.

In many ways, we have been pitted against each other.

My advice to both groups is simple. Your anger and frustration are justified, but please direct it to the parties who actually deserve the blame.

The post Who is to Blame for the Servicing Mess at Mohela, Nelnet, and Others? appeared first on The Student Loan Sherpa.

Nelnet borrowers have two main options for consolidation. Borrowers can refinance their loans with a private lender or consolidate federal loans with the federal government. Both options have significant pros and cons.

Unfortunately, the Nelnet site does a poor job of explaining the many consolidation choices and reasons to consider each route. Today we will look at these options for private loans and for federal loans.

Federal Loan Management with Nelnet

Nelnet is one of the biggest federal loan servicers. If you are unsure if your Nelnet loans are federal loans, you can always visit the National Student Loan Database. There you will find the federal government’s database that shows who services your federal loans. If you see your Nelnet loans on the list, you can be certain they are federal.

There are two approaches to consolidating your federal student loans. Approach one is to consolidate your federal loans with the federal government. Approach two is to refinance your federal loans with a private company. Picking the wrong approach can be a huge mistake, so it is critical you understand your choices.

Consolidating Federal Loans with the Federal Government

Consolidating your federal loans into a federal direct consolidation loan has a couple of advantages. If you are a borrower of certain loans, such as graduate PLUS loans, consolidation can actually turn ineligible loans into loans that are eligible for programs like Public Service Student Loan Forgiveness. If you think this applies to you, have a conversation with your loan servicer as soon as possible.

A smaller advantage of federal direct consolidation is that it puts all of your loans in one place. This prevents you having to deal with multiple federal loan servicers. That being said, consolidation can restart certain loan forgiveness clocks, so it is very important to understand the implications of federal consolidation before making the decision.

One thing to note about federal consolidation is that it doesn’t change your interest rates. When the loans are combined, they generate the weighted average of your interest rates so that your interest payments over the life of the loan are essentially the same.

If you want lower interest rates…

Refinancing Federal Loans with a Private Lender

Going this route is the only way to get lower interest rates on your federal student loans. That being said, this option is definitely not for everyone. By consolidating with a private lender you give up the perks that come with a federal loan. These include income-based repayment plans and public service student loan forgiveness. If you think that there is any chance that you will need these government perks, it is probably best to keep your loans with the federal government.

However, if you don’t think you will ever need the federal programs, now is a great time to be consolidating student loans on the private market. We have found refinance lenders with interest rates of just over 2%. Some of them even offer a bonus to new customers.

This is also one area in which we take issue with Nelnet. Nelnet operates as both a federal student loan servicer and a private refinance lender. Nelnet Bank, the refinance lender, is a fine option, but borrowers should understand that many other options exist. Nelnet customers don’t have to use Nelnet bank to refinance.

Options for Private Student Loans

The Federal Government – If you are thinking about going this route, you are very clever. Turning a private loan into a loan with federal perks would be great, unfortunately it cannot be done. If you have a private loan, there is no way to easily convert it into a federal loan.

Private Lenders – This route is the easiest call. If you have a strong credit score and income, odds are pretty good that you will be able to lower you interest rate though refinancing. This is because you are much less of a credit risk now that you have a degree and job. Interest rates on private loans for borrowers who don’t have a degree or full-time work are usually pretty high, but it isn’t always a sure thing. Common refinance lenders include: SoFi, Laurel Road, and College Ave.

Final Thoughts on Refinance and Consolidation of Nelnet Loans

There are many options for Nelnet student loans. The most important thing is to evaluate all of the potential choices and to pick the one that works best for your personal situation. There really isn’t a one size fits all approach to loan consolidation.

The post Consolidation and Refinance Options for Nelnet Federal Student Loans appeared first on The Student Loan Sherpa.